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Read Making a Killing

home / healthcare / in the media

Alameda Times-Star (Alameda, CA)
Jul 31, 2004

by Nicholas Yulico, BUSINESS WRITER

Kaiser: Profit up, members are flat

OAKLAND -- Kaiser Permanente's profits increased 37 percent in the first half of this year, yet national membership remained flat at about 8.2 million, the company said Friday.

The nation's largest nonprofit health care organization said its net income for the first half of this year was $832 million, up from $607 million in last year's period.

Operating revenues totaled $13.9 billion in the first half of this year. Revenues in the second quarter totaled $7 billion, up from $6.3 billion in the second quarter of 2003.

"This continued solid financial performance will fund long-term capital needs, seismic retrofitting, facility improvements, community benefit programs and KP HealthConnect, our new electronic physician support tools," Chief Executive George Halvorson said in a statement.

Jerry Flanagan, health care director for The Foundation for Taxpayer & Consumer Rights, thinks the 37 percent spike in profits is outrageous.

"At a time when 6.5 million Californians can't afford health care, it is absolutely unacceptable that a so-called nonprofit insurer should see its income increase by 37 percent."

Kaiser says about 96 percent of that net income "goes back into investing for the future," such as the new hospital it recently broke ground on in Antioch, along with projects under way in Livermore, Tracy, Santa Clara, Modesto and the Sacramento area.

Through June 30, Kaiser invested $816 million in capital projects, up from $599 million in last year's period.

But keeping reserve cash for capital projects drives up consumers' premiums, Flanagan said. Those reserves should instead be reinvested into patient care, he said. Kaiser counters by saying investing in capital projects is investing in patient care.

Kaiser premiums for its 3.2 million California members were up, on average, 16 percent at the beginning of this year compared to the beginning of 2003, according to a Kaiser spokesperson. But the year-over-year increase has now dropped down to 10 percent.

In 2003, rates increased 15.2 percent in general for the state's health care market, but Kaiser members have complained to Flanagan's organization about 20 percent to 30 percent increases, Flanagan said.

Under the "consumer stories" section at www.calhealthconsensus.org, members describe their Kaiser rate increases.

Flanagan also took issue with a $40 million ad campaign Kaiser will launch next week to promote health and wellness -- along with Kaiser's image in the community, as a recent Wall Street Journal article suggested.

"Patients don't want an advertising campaign, they want lower premiums," Flanagan said, adding that the $40 million is enough money to insure 4,500 California families, based on the $8,500 cost for health care for a family of four, a number he said comes from Kaiser.

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