KAISER: PROJECTS FIRST-EVER LOSSES IN 1997
For the first time ever, Kaiser Foundation Health Plan andThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
Hospitals is projecting an annual loss this year of $30 million
to $50 million, San Francisco Chronicle reports. Attributing the
loss to an "increasingly competitive health care marketplace,"
Kaiser CFO Susan Porth said, "We're facing a potential loss this
year relating mostly to one-time charges that we would not expect
to recur in subsequent years."
CHANGE OF PACE
Kaiser previously has had problems with too much profit, but
because the nonprofit company "has been trying to convince its
2.6 million customers and its increasingly combative labor unions
that costs need to be cut to remain competitive." The average
profit for the national Kaiser system is about four percent of
revenue. According to Porth, when considering continuing
operations, Kaiser expects to "have some small net income in 1997
-- probably less than one percent of revenues." The company is
"reviewing all capital improvement projects and looking to
streamline its procedures," in an attempt to "[stem] the tide of
red ink." Customers should not expect any immediate rate
increases because rates for 1998 are already set, Chronicle
reports. Porth said, "We are not going to do anything to hurt
our long-term viability or to hurt our service." Moody's placed
a "watch" on its Aa3 credit rating of about $1.5 billion in
Kaiser bonds, Chronicle notes.
According to Wanda Jones of the New Century Healthcare
Institute in San Francisco, "many of the HMOs are seeing losses
as they battle for market share." She said, "Those battles for
market share are very aggressive and very bloody. You have to
blow a few dollars before you pull market share away from
competitors." Kaiser had looked to markets outside California in
an attempt to improve margins in response to "aggressive cost-
cutting by rivals." According to Porth, California operations
remain profitable, "despite an anticipated one-time charge to
account for consolidating the Northern and Southern California
information technology operations." However, Porth said, "We
also have some losses outside of California, and in general are
not meeting expectations" (Kazakoff, 10/14).