Kaiser Permanente nearly tripled its net income in 2019 to $7.4 billion due in large part to its investment portfolio, the nonprofit integrated health system reported on Monday. That's up from $2.5 billion in net income in 2018.
Oakland, California-based Kaiser reported operating income of $2.7 billion and other income of $4.7 billion. Nearly two-thirds of Kaiser’s net income came from investment performance rather than its core operations.
Kaiser said the performance allows the organization to continue to make key capital investments back into the company and community. But the financials come as nonprofit healthcare operators across the country face rising scrutiny from regulators and lawmakers for mounting profits and their tax-exempt status.
Nonprofits — giant California player Kaiser in particular — faced a wave of heightened scrutiny last year as income rose to what critics viewed as excessive levels, especially for a tax-exempt company. California governor Gavin Newsom, a Democrat, signed a law in September requiring Kaiser break out expenses and revenue for its hospitals on a per-facility basis, revenue by type of payer and rate increased by type of service starting in the 2020 financial year.
Kaiser execs stressed they will have an eye on affordability as they mull how to spend the profits.
"Our financial results allow us to make capital investments, deploy new technologies and drive affordability for our members," Kathy Lancaster, Kaiser's CFO, said in a statement.
For example, in 2020 Kaiser was able to reduce out-of-pocket costs and improve benefits for its Medicare Advantage members. Kaiser said it also was able to keep individual and family plan rate increases at or below the expected rate of inflation. Kaiser insured 12.2 million members at the end of 2019, an increase of 81,000 members year over year.
In 2019, Kaiser opened 17 new medical offices, bringing its number of total offices to 712. Currently, the system has 95 more medical offices in some stage of design or construction, with plans to open within the next five years. The system also includes 39 hospitals and 50 retail and employee clinics.
Throughout 2019, the health system also continued its multi-year plan to invest $700 million in opening or renovating 220 locations dedicated to mental health.
Kaiser lost its leader, Bernard Tyson, unexpectedly at the age of 60 last year. Tyson was named CEO in 2013 but his career at Kaiser spanned more than 30 years. He was succeeded by former EVP and group president Gregory Adams in December.