Kaiser Loses $92 Million for Quarter
Kaiser Permanente Group, the nation’s largest health-maintenance organization, on Friday reported an operating loss of $92 million for the first quarter as it struggled to cut costs on the heels of a $270-million loss last year.
The not-for-profit company, which broke even in the year-earlier quarter, said the quarterly loss was caused primarily by a need to direct patients away from its network in California and pay for them to be treated elsewhere. Its revenue rose 11% to $4.2 billion in the period.
Kaiser’s medical centers in California, its largest market, could not handle the demand from customers who joined the plan for its low premiums as competitors raised rates.
Kaiser said the losses resulted from its failure to accurately estimate how much health-care costs would rise when setting rates for customers. Oakland-based Kaiser, which negotiates rates for its biggest customers each spring for the ensuing year, is raising premiums for 1999 in a bid to further stem the red ink.
“The early impact of our improvement efforts won’t be reflected in our financial results until the second half of this year. The full impact of these efforts should be realized during 1999,” Chairman David Lawrence said.
As part of its plan to cut costs, the company is working to reopen two hospitals in Southern California and sign flat-fee contracts with out-of-network health-care providers in a bid to reduce the need to refer members to full-fee non-Kaiser providers.
At a Glance
Other earnings, shown excluding one-time gains or charges unless noted, include:
* BAT Industries of Britain said its first-quarter profit fell 4% to $557 million from a year ago on a 9% rise in sales to $10.3 billion. The world’s second-largest cigarette maker said profit from tobacco rose 7% and profit from its financial services unit rose 16%, led by Farmers Group in the United States.
* Host Marriott Corp. said its first-quarter profit from operations rose 52% to $91 million, or 41 cents a diluted share, from a year ago, on acquisitions and higher room prices at its upscale hotels. Revenue grew 29% to $321 million.
