Kaiser Permanente’s net income increases in 2021, but operating margins fall sharply

Gordon B. Johnson

Photo: Cavan Images/Getty Images

Kaiser Permanente experienced mixed financial results in 2021, with an increase in net income for the year but steep declines in operating income and operating margin, the company recently revealed.

Total operating revenues topped $93 billion in 2021, up from $88 billion in 2020, but total operating expenses also increased, from $86.5 billion in 2020 to $92.5 billion in 2021. That led to an operating margin of just $611 million last year, as compared to more than $2 billion the year prior.

Kaiser’s operating margin was just 0.7% last year, compared to 2.5% in 2020. The bright spot was net income, which was about $8 million for the year – almost a $2 million increase from 2020.

There were some other positive signs. Like other organizations, Kaiser Permanente benefited from strong investment performance due to robust financial markets during the year, resulting in total other income and expense of $7.5 billion compared to $4.1 billion in 2020. 

This sharp increase in investment performance more than offset the $1.6 billion decrease in operating income, the company said.

Capital spending totaled $3.5 billion compared to $4 billion the year prior. During 2021, Kaiser Permanente opened 11 medical offices; it now includes 734 medical offices, 39 owned and operated hospitals, and 58 retail and worksite clinics.

Membership as of December 31, 2021 was 12.5 million, reflecting an annual increase of almost 185,000 members. Government programs that help people retain healthcare coverage during the pandemic led to growth in members with individual, Medicare, and Medicaid plans, said Kaiser. Medicaid growth drove more than half of the 2021 membership increase.

WHAT’S THE IMPACT

Kaiser Chair and CEO Greg Adams said the COVID-19 pandemic continues to impact the system, though it still remained committed to rolling out vaccines and boosters, as well as administering tests while juggling the Delta and Omicron variants.

“Throughout this crisis, gratitude goes to our dedicated employees and physicians who have remained focused on providing care and strong support for members and communities,” he said.

The system also invested in telehealth technology, logging about 28.8 million telehealth visits and close to 15 million e-visits during the year. Members visited kp.org and the Kaiser Permanente mobile app more than 582 million times for activities such as sending secure messages to clinicians, viewing lab results, and filling 28.7 million prescriptions.

The system also invested $2.6 billion in community health programs. The Kaiser Permanente Medical Financial Assistance program provided almost 370,000 low-income, uninsured, or underinsured patients a total of more than $460 million in assistance to cover part or all of their medical expenses.

THE LARGER TREND

In November, Kaiser Permanente and the Alliance of Health Care Unions reached a tentative agreement on a four-year contract, covering nearly 50,000 Kaiser Permanente healthcare employees in 22 local unions, thereby avoiding a potential nationwide strike that had been set to begin this week.

The health system and union came to an agreement on payment terms, which were not disclosed.

The strike was over the health’s system’s proposals to lower wages for current employees and to reduce compensation for incoming workers — a proposal the group decried as burdensome in the midst of a healthcare staffing crisis, according to United Nurses Associations of California/Union of Health Care Professionals members in Northern California.

Kaiser Permanente, for its part, had maintained that it was attempting to address the unaffordable costs of healthcare, saying wages and benefits accounted for half the system’s operational costs.
 

Twitter: @JELagasse
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