Kaiser Permanente took a $442 million charge in the fourth quarter of 2002 to write off its investment in a failed effort to build an automated medical records system.
The not-for-profit HMO announced last month that it would spend $1.8 billion in the next three years on established medical information software from Epic Systems Corp. to replace the proprietary system it had been developing with IBM Corp. (Feb. 10, p. 6).The scrapped system-which included electronic order-entry capabilities for Oakland, Calif.-based Kaiser's 12,000 physicians nationwide-would have cost $2.8 billion and taken at least five more years to complete, company officials said. With the charge, Kaiser reported net income of $70 million in 2002, compared with $681 million in 2001. Annual revenue rose 14% to $22.5 billion. Excluding the charge, the company would have earned $512 million in 2002, still 25% less than the prior year because of investment losses and increased pension costs, officials said. Kaiser had posted three straight years of profits since a $288 million loss in 1998.