Kaiser Permanente, the country's largest HMO, lost $102 million in the third quarter alone, indicating the plan is far from righting its financial ship.
The results, released Friday, suggest the company's total loss this year could exceed last year's $266 million deficit, which was the first losing year in the plan's 53-year history. Through Sept. 30, Kaiser has posted $127 million in losses on revenues of $12.3 billion.
Executives at the Oakland, Calif.-based company blamed the continuing losses on industrywide trends such as rising medical and pharmaceutical costs, as well as rapid internal growth, which forced Kaiser to send many of its California enrollees to non-Kaiser facilities.
"The costs we're experiencing at Kaiser Permanente are reflective of what's happening to healthcare providers across the country," said Dale Crandall, Kaiser's new chief financial officer, who internal sources say has emerged as a key player in the organization's turnaround plans since his arrival in June.
Many internal and industry sources say Kaiser badly mismanaged its contracting with outside hospitals, and the resulting losses are a major element in the financial meltdown.
In response, Kaiser raised its premium rates significantly for 1999 and opened two new hospitals in Los Angeles and Sacramento, Calif. In addition, strengthening financial accountability within the organization is expected to be a major element in the organization's latest turnaround plan. Details should be released before Thanksgiving, officials said.
Separately, Kaiser last week neared completion of the sale of its troubled 111,000-enrollee southwest division in Texas to HMO Texas, an affiliate of Las Vegas-based Sierra Health Services.
Similar regional deals could be in the offing, as Kaiser does surgery on itself to produce a leaner, more centralized organization. It plans to jettison some of the acquisitions it made in recent years.
In a possible harbinger of other action, Kaiser and its Group Health Cooperative of Puget Sound affiliate in Seattle have reached a new partnership arrangement that cuts many operational links between the two not-for-profit organizations.
What Group Health officials call a "mid-course correction" to their year-old partnership is resulting in the return of some administrative activities to each partner. Functions such as finance and human resources had been handled jointly.
In addition, "they (Group Health) won't be on our books any more," said Kaiser spokeswoman Beverly Hayon, and Group Health's 650,000 enrollees will no longer be tallied on Kaiser's enrollment rolls.
Kaiser is likely to emphasize loose affiliations rather than mergers and acquisitions in the foreseeable future, Hayon said. The merger-oriented approach was spearheaded by Jim Williams, senior vice president of group operations and strategic development, who abruptly resigned Oct. 21 (See related story, this page).