California passes legislation requiring Kaiser Permanente to reveal individual hospital pricing

Rendering of Kaiser Permanente's planned headquarters
California passes bill to require pricing transparency at Kaiser Permanente facilities. (Kaiser Permanente)

California legislature passed a bill this week to require Kaiser Permanente to follow the same financial disclosure laws as other healthcare providers in the state. Now Gov. Gavin Newsom has 10 days to decide whether or not to sign the bill into law, mandating Kaiser to report pricing on a per-facility rather than a group basis.

Sen. Richard Pan (D-Sacramento), author of the bill, says Kaiser has long operated under a different set of rules than other hospitals and insurance companies when it comes to pricing transparency.

Specifics of the mandate state that Kaiser needs to provide more data on the revenue and profits of individual hospitals as opposed to its current practice of lumping figures into the categories of just Northern California or Southern California. Currently, Kaiser’s 35 hospitals operating in California are the only facilities—out of 400 total—that are not required to report financials on a per-facility basis.

Other new requirements for Kaiser would include breaking out revenue by type of payer at each facility and breaking out rate increases by type of service (hospital, physician, pharmacy, radiology, laboratory).

Originally introduced into the state senate in February of 2019, the bill passed 29-to-10 in the Senate and passed 58-to-13 in the House on August 22.

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The bill states:

“Existing law generally requires a healthcare facility to report specified data to the Office of Statewide Health Planning and Development (OSHPD), but requires OSHPD to establish specific reporting provisions for a health facility that receives a preponderance of its revenue from associated comprehensive group practice prepayment healthcare service plans. Existing law authorizes hospitals to report specified financial and utilization data to OSHPD, and file cost data reports with OSHPD, on a group basis, and exempts hospitals authorized to report as a group from reporting revenue separately for each revenue center.”

But the new law would eliminate the authorization for hospitals to report specified financial and utilization data on a group basis, Pan said.

Instead, any health facility, including Kaiser, “that receives a preponderance of its revenue from associated comprehensive group practice prepayment health care service plans and that is operated as a unit of a coordinated group of health facilities under common management to report specified information for the group and not for each separately licensed health facility.”

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"For too long, Kaiser Permanente has operated under a different set of rules when it comes to financial transparency, and this bill will finally bring the corporation more in line with other hospitals and insurance companies," Pan said in a statement.

In order to comply with the new legislation, Kaiser estimates it would need to hire two workers per facility to compile data on a quarterly basis. Officials said they were disappointed with the legislation as it was written.

"Kaiser Permanente is not exempt from any state financial reporting data," in a statement to FierceHealthcare. "With one minor amendment to SB 343, we could have removed our opposition and reduced unnecessary costs. We are disappointed the sponsor of the bill continues to choose conflict over compromise.”

Kaiser has the largest market share in California with nearly 9 million members. It reported $79.7 billion in revenue in 2018. In the second quarter, Kaiser Permanente’s net income soared to $2 billion, a dramatic increase over the $653 million posted the year before.  It has 39 hospitals and 701 medical offices and 218,853 employees. It controls more than 40% of the overall health insurance market in California, including half of the large group enrollment