Dive Brief:
- Strikes, including a monthlong work stoppage among nurses and other employees at Kaiser Permanente that ended in February, cost the nonprofit over $1 billion in the first quarter, a spokesperson for the health system told Healthcare Dive.
- Thirty-one thousand nurses and other healthcare workers at Kaiser facilities in California and Hawaii took to the picket lines early this year to secure wage increases and other concessions from the health system. Costs from that strike and others added to Kaiser’s rising expenses in the quarter, which chipped away at the nonprofit’s operating margin, according to earnings results released last week.
- Expenses for Kaiser, the largest nonprofit in the country, rose almost 10% year over year to hit $33.9 billion in the quarter.
Dive Insight:
Workers in January announced they would begin striking at Kaiser after more than seven months of bargaining over contract negotiations. Their unions called for increased staffing and wages, which they argued hadn’t kept pace with the rising costs of food, healthcare and housing.
The strike caused some delayed surgeries and other care disruptions at over two dozen hospitals and clinics. Patients reported further disruptions when 3,000 more pharmacy and laboratory workers said they would join the strike in early February.
Although that concluded at the end of February, more than 2,000 mental health workers in Northern California then took to the picket line for a one-day strike in March.
The California-based healthcare conglomerate, which operates over 50 hospitals, a health plan and a subsidiary meant to operate other nonprofit hospitals, reported early earnings results for its first quarter last week.
Kaiser said it worked to ameliorate the rising cost of care in the first quarter while improving efficiency. Still, rising expenses coupled with one-time costs from the strike narrowed Kaiser’s operating income to $711 million in the first quarter, a 24% decrease compared to the prior year.
The first quarter typically reaps higher operating income for Kaiser due to enrollment cycles in its health plan and moderates later in the year when care utilization increases and revenue remains relatively flat, according to the nonprofit.
Kaiser’s operating margin also fell to 2.1% in the quarter, compared to a margin of 2.9% in the prior year.
Membership in Kaiser and other affiliate health plans topped 13.5 million people, adding 400,000 more members compared with the prior year. The nonprofit’s health plan, which is the market leader of commercial health insurance membership in California, bolsters Kaiser’s operating profile when its margins might be considered weaker or midrange at other systems without successful health plans, according to credit agency Fitch Ratings.
Capital spending rose to $1.2 billion during the first quarter, an increase of $200 million compared to the prior year. The line item is expected to be elevated until 2028, as Kaiser ticks off $18 billion in planned investments, according to Fitch. Some of those investment include mandated hospital updates to comply with California’s new law around earthquake building standards that will go into effect in 2030.
Overall, Kaiser reported $34.6 billion in revenue from the first quarter. Also in the quarter, the nonprofit finalized its joint venture with Renown Health to jointly own health plan Hometown Health.
The nonprofit reported results alongside its subsidiary Risant Health, which Kaiser created to acquire and operate other nonprofit hospitals. Kaiser typically reports more detailed financial results later in the month.
