Kaiser Permanente is the latest health system showing signs of struggle amid rising costs.
Kaiser, an Oakland, California-based integrated nonprofit, on Friday reported a $4.47 billion net loss in 2022, compared with a $8.08 billion gain in 2021.
Operating revenue came to $95.41 billion, a 2.4% increase from 2021. Expenses rose 4.5% to $96.68 billion, driven by increased care volume due to previously deferred procedures, higher costs of goods and increased spending on labor.
Kaiser lost $3.2 billion due to poor market performance on investments.
Pressures on labor costs will be an ongoing factor for the system. More than 70% of Kaiser’s workforce is represented by labor unions. In late 2022, Kaiser and the California Nurses Association ratified a new contract for more than 21,000 workers after months of tense negotiations. The contract involves a 6% pay increase for two years, followed by a 5.25% increase in the third and fourth years, said Tom Meier, corporate treasurer.
Meier said Kaiser’s contract labor costs have nearly returned to normal levels. He attributed the downward trend to a more streamlined recruiting process and competitive compensation packages.
Care and testing for COVID-19 was still a significant cost factor in 2022, Meier said.
“It hasn’t really dropped off. In fact, it [was] higher in 2022 than it was in 2021,” he said. “When you look at the fourth quarter, it was impacted by more flu and RSV and not as much by COVID, so hopefully we’re seeing an end in sight.”
To help save money, Kaiser re-evaluated the necessity of vacant positions, cut discretionary spending and worked to reduce administrative costs. But Meier said the system still kept its 2022 capital spending steady with 2021 and increased its community health investments by about $200 million.