Kaiser Permanente bounces back with $1.2B gain, 0.9% operating margin in Q1 2023

Kaiser Permanente’s operations and bottom line alike have landed in the black during the first quarter of 2023, a welcome turnaround for the large, integrated nonprofit after it lost $4.5 billion across the entirety of 2022.

Net income for the three months ended March 31, 2023, landed at $1.2 billion, up from a $961 million loss reported during the same period in 2022, the organization shared Friday evening in a press release.

Operating income for the quarter also rose from last year’s $72 million (-0.3% operating margin) to $233 million (0.9% operating margin), the system said.

The numbers outline a “sound financial position” as Kaiser looks to maintain capital investments ($930 million in the first quarter of 2023) and expand its care and coverage models, Executive Vice President and Chief Financial Officer Kathy Lancaster said in the release.

Similarly to other systems that have reported their first-quarter numbers, increased volumes and labor spending were major factors in the quarter’s operating performance.

Total operating revenue rose 4.2% year over year to $25.2 billion, Kaiser said, while total operating expenses rose about 3% to $25 billion. The increases across its preventive, routine, chronic, acute and deferred care channels prompted the system to increase clinical hiring by 15% year over year as it looks to reduce its reliance on pricey contract labor.

“Kaiser Permanente also implemented strategies to increase administrative efficiencies and effectively manage discretionary spending,” the system wrote.

Membership as of March 31 grew by more than 120,000 lives from the start of the year to a total of 12.7 million, the nonprofit said, according to the release. The first quarter also saw almost 6 million scheduled phone and video telehealth visits as well as more than 170,000 unscheduled, 24/7 virtual visits, the nonprofit said.

Perhaps the largest year-over-year swing for Kaiser’s bottom line was the $975 million of total other income and expense. That number was “driven largely by favorable financial market conditions,” the system said, and stands in stark contrast to the $889 million loss logged during the first quarter of 2022’s market turmoil.

Oakland, California-based Kaiser Permanente spanned 624 medical offices, 39 hospitals and 43 retail and employee clinics as of March 31. The organization typically discloses further details on its quarterly numbers in regulatory documents filed in the weeks following its public performance announcements.

Word on the gains came about a week after Kaiser announced it would be acquiring 10-hospital Geisinger Health, a fellow integrated nonprofit based in Pennsylvania, as a first step toward the formation of a cross-country value-based care organization.

Called Risant Health, the ambitious entity is planned as a separate entity from Kaiser with a $5 billion, five-year investment and about half a dozen additional health system acquisitions.

“Our focus in 2023 continues to be advancing our leading value-based care and coverage model, which has defined Kaiser Permanente for more than 77 years,” said Chair and CEO Greg A. Adams. “Despite the ongoing challenges facing the healthcare industry, Kaiser Permanente is not wavering on our commitment to providing preventive, evidence-based, equitable care and quality outcomes, and offering multiple access points for member care and service. I am grateful to our dedicated, talented workforce for their contributions to our mission and model.”