KAISER PERMANENTE: Turnaround Strategy Meets Mixed Success
Hoping to recover from $554 million in losses over the past two years and maintain its image as a cutting-edge insurer, Kaiser Permanente, the "nation's largest nonprofit HMO," is increasing rates and cutting costs, USA Today reports in a profile of Kaiser chair and CEO David Lawrence. Lawrence's plan -- which includes postponement of expansion plans, sale of "money-losing divisions" and rate increases -- has already resulted in income of $61 million for the first quarter of this year. He "is aiming for 2% profit this year and 4% next year." Critics, however, argue that Kaiser "has lost its way in its zeal to cut costs and is indistinguishable from its for-profit rivals." The California Public Employees Retirement System (CalPERS), which represents 1 million state workers, last week blasted Kaiser for hiking rates 11.7%, encouraging employees to seek coverage elsewhere. Meanwhile, the plan faces an investigation for allegedly violating a New York law that "forbids insurers from forcing patients to call their doctors before going to an emergency room" and recently settled similar allegations in Texas and California. Lawrence remains optimistic that the HMO's tight network of doctors, clinics and hospitals will continue to mark the HMO as a provider of high quality, standardized care. "We're still growing," Lawrence said, adding, "People are asking for something different when they choose our organization -- an integrated delivery system" (Appleby, 5/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.