Omicron surge expenses, members’ pandemic-deferred care and rough investment markets led Kaiser Permanente to a first-quarter operating loss of $72 million and a net loss of nearly $1 billion.
The integrated health system reported Friday total operating revenues of $24.2 billion for the first quarter, up from $23.2 billion in the first quarter of 2021.
Total operating expenses, however, rose to nearly $24.3 billion for the most recent quarter from the prior year’s $22.2 billion, Kaiser Permanente said.
The result was a -0.3% operating margin for the first quarter of 2022, well down from the 4.4% operating margin and over $1 billion operating income the nonprofit notched a year earlier.
“During the first quarter of 2022, a surge in COVID-19 cases—the steepest since the start of the pandemic—led to a substantial increase in the demand for related care and testing,” Kaiser Permanente wrote in its announcement. “COVID-19 expenses drove an additional $1.4 billion in expenses. Those expenses, along with the costs of providing care to our members that were deferred earlier in the pandemic, were the primary drivers of additional expenses.”
Kaiser Permanente noted that it provided care for more than 688,000 COVID-19 patients during the quarter, a tally that included over 26,000 hospitalized patients, 2.5 million performed COVID-19 diagnostic tests and 1.3 million supplied COVID-19 home tests.
The organization also acknowledged the “significant increases in labor costs” health systems across the country have experienced during 2022’s opening frame.
Irregularities aside, Chair and CEO Greg Adams said Kaiser Permanente’s “underlying operating performance remains solid and aligned with expectations.” The system also highlighted the addition of more than 88,000 new members over the course of the quarter, nearly 33,000 of which were Medicaid enrollees.
Beyond its operations, Kaiser Permanente reported a quarterly loss of $889 million within its “other income and expense” category, which the organization said was “driven largely by investment losses.” Kaiser Permanente had made $1 billion in this category during 2021’s same quarter.
Taken together, the nonprofit saw a first-quarter net loss of $961 million in 2022, a substantial turnaround from the more than $2 billion net income of the prior year.
The integrated system also reined in its capital spending by $34 million year over year to $872 million in the most recent quarter.
“While the increase in pandemic-related expenses, overall rising costs, and investment market losses impacted our finances this quarter, Kaiser Permanente navigated this challenging time providing high-quality care and continued investing in our integrated model including ongoing capital investments to best serve our members,” Kathy Lancaster, executive vice president and chief financial officer, said in a statement. “We controlled discretionary spending, optimized COVID-19 testing, addressed surgical backlogs, and managed outside medical expenses.
“As we face the ongoing uncertainty and prolonged effects the pandemic is having on the health care industry, we are well-positioned to continue delivering high-quality, affordable care and remain vigilant stewards of resources entrusted to us in this dynamic environment,” she said.
Kaiser Permanente is comprised of 39 hospitals and, as of Dec. 31, 734 medical offices and 58 retail and worksite clinics. It currently employs over 217,000 people, tens of thousands of whom are nurses and physicians.
The organization saw its full-year net income jump from $6.4 billion in 2020 to $8.1 billion 2021. While the integrated system’s operating margin dropped from 2.5% to 0.7%, Kaiser Permanente more than compensated for the difference with the support of last year’s strong investment markets.