Kaiser Permanente posts $4.47 billion net loss in 2022 due to rising costs

Kaiser Permanente is the latest healthcare system showing signs of dealing with rising costs.

Kaiser, an integrated non-profit organization based in Oakland, California, on Friday reported a net loss of $4.47 billion in 2022, compared to a profit of $8.08 billion in 2021.

Operating revenue was $95.41 billion, up 2.4% from 2021. Spending rose 4.5% to $96.68 billion due to increased medical care due to previously deferred procedures, higher cost of goods and higher labor costs.

Kaiser lost $3.2 billion due to poor market performance of the investment.

The pressure on labor costs will be a constant factor for the system. Over 70% of Kaiser’s workforce is represented by trade unions. In late 2022, Kaiser and the California Nurses Association ratified a new contract for more than 21,000 workers after months of intense negotiations. The contract provides for a salary increase of 6% over two years and then 5.25% over the third and fourth years, said Tom Meyer, corporate treasurer.

Meyer said Kaiser’s contract labor costs are almost back to normal levels. He attributed the downward trend to a more streamlined hiring process and competitive compensation packages.

Care and testing for COVID-19 continued to be a significant cost driver in 2022, Meyer said.

“He didn’t actually fall. In fact, he [was] higher in 2022 than in 2021,” he said. “When you look at the fourth quarter, it was more affected by the flu and RSV, and not so much by COVID, so hopefully we are seeing the end.”

To save money, Kaiser reassessed the need for vacant positions, cut discretionary spending, and worked to reduce administrative costs. But Meyer said the system still kept its 2022 capital spending in line with 2021 and increased its health care investment by about $200 million.