- Kaiser Permanente is planning a new headquarters in downtown Oakland, California, to house more than 7,000 employees and physicians. The 1.2 million-square-foot building is set to break ground next year and is scheduled for completion in 2023.
- The new headquarters announced Monday consolidates staff from seven sites in Northern California that will eventually be acquired by a local developer and renovated for commercial use, according to the health system.
- The new building, The Kaiser Permanente Thrive Center, will include community amenities like cooking, exercise classes and farmers' markets. The organization said the building will generate a $23 million one-time benefit to the surrounding area and $15 million a year in local tax revenues.
In creating a new headquarters, Kaiser Permanente estimated the move will save it $60 million annually in operating costs. Similarly, a major for-profit health system, Tenet Healthcare, cited cost-cutting as a reason for a pending move of its headquarters from Dallas to nearby suburb Farmers Branch.
While hospitals have been struggling with inpatient admissions trending downwards and softening reimbursements, nonprofits like Kaiser Permanente appear well-positioned to withstand the shifting healthcare landscape, leaving room for investment in infrastructure.
The system currently has nearly 40 hospitals and almost 700 medical offices. It also operates a health plan with more than 12 million members.
A recent report from S&P Global found nonprofit providers have seen their balance sheets improve since the early 2000s and are likely to remain stable or profitable over the next decade.
Kaiser Permanente notched a surging first quarter of this year with net income up to nearly $3.2 billion, a notable increase from $1.2 billion the year prior. The organization did note a change in its accounting practices is responsible for some of the uptick.
In Q1, the organization spent $834 million on capital projects and opened two medical facilities. It expects to open 80 medical offices during the next three years and is in the middle of a $500 million project to expand mental health services.
Hospital construction is on the increase, according to the American Society for Health Care Engineering. More than half of hospitals the group sampled recently said they planned to increase capital budgets allocated to building off-site facilities.
Kaiser Permanente has had a presence in Oakland for more than 70 years and has recently invested in regional affordable housing initiatives and efforts to combat homelessness. Such community engagement can be important for health systems, which can face scrutiny from surrounding neighborhoods.
Fellow nonprofit Mayo Clinic received public criticism from Minnesota residents in 2017 when plans for development near its headquarters in Rochester was thought to pull resources away from other facilities and contribute to the consolidation of services from two hospitals about 25 miles apart.