Kaiser Permanente posts 3.4% operating margin, billions in net income for Q1 2024

Kaiser Permanente kicked off 2024 with $935 million of operating income (3.4% operating margin) and more than $2.7 billion of net income when excluding a one-time, $4.6 billion net asset gain from its Geisinger Health acquisition, according to top-line first-quarter numbers shared late Friday.

The performance handily outpaces the $233 million operating income (0.9% operating margin) and $1.2 billion bottom line of last year’s opening quarter.

Still, the integrated nonprofit noted that its operating income was still “below historical first-quarter trends leading up to the pandemic” due to industrywide cost pressures around high utilization, care acuity and elevated goods and services expenses. The top of the year is typically bolstered by the timing of the open enrollment cycle and then followed by steady revenue but rising expenses, the organization explained.

“In the first quarter, we executed on our strategy of ensuring we have the right resources and capabilities to meet the evolving needs of our members while driving affordability,” Executive Vice President and Chief Financial Officer Kathy Lancaster said in a release. “Our financial performance and our integrated care and coverage model provide a stable foundation to remain resilient as healthcare continues to face headwinds.”

Oakland, California-based Kaiser Permanente has laid off or has shared plans to lay off about 350 workers since last November, primarily among IT and administrative positions.

It also has been working to sell off $3.5 billion of its private investment holdings to secondary buyers to settle its cash constraints,  The Wall Street Journal reported this weekend. The anonymous sources sited in that report said the system is aiming to sell off another similarly sized portion of the holdings later on this year.

In the three months ended March 31, the system reported $27.4 billion in operating revenues and $26.5 billion in operating expenses, year-over-year increases of roughly 8.6% and 5.9%, respectively. It also highlighted the addition of 66,000 new members in its health plan since the end of last year and now sits at 12.6 million members as of March 31.

That date also marked the close of Kaiser Permanente’s big-ticket purchase of 10-hospital Geisinger, part of its plan to form a multisystem, multiregional value-based care organization it’s calling Risant Health. Financial filings outlined up to $5 billion committed to Risant Health, $2 billion of which will be going to Geisinger through 2028.

Excluding the acquisition’s one-time $4.6 billion net asset gain, Kaiser Permanente recorded over $1.8 billion of other income, a category that typically is dominated by a health system’s investment returns. The system attributed this past quarter’s high tally to “favorable financial market conditions.” Capital spending declined from the first quarter of 2023’s $930 million to this year’s $808 million.

“I am thankful to our dedicated employees and physicians for their continued efforts, which allowed us to improve first-quarter performance compared to a year ago,” CEO and Chair Greg Adams said in a statement. “Together, we are leading a national effort to make quality care more equitable and affordable for all.”

Kaiser Permanente is the country’s largest nonprofit health system by revenue. Across 2023, it logged more than $100 billion in both operating revenues and expenses as well as $329 million of operating income (0.3% operating margin) and about $4.1 billion in net profit.

Its numbers come just after fellow major integrated nonprofit Mass General Brigham shared a more narrow $29.7 million (0.6% operating margin) gain during the period ended March 31. The East Coast organization outlined less pronounced operating revenue gains as well as heightened claims expenses.