Kaiser Permanente closed out 2022 with an operating loss of $1.3 billion and a net loss of nearly $4.5 billion, according to a press release with the system's top-line financials released Friday.
A $4.2 billion rise in operating expenses, despite the $2.3 billion rise in operating revenues, put the nonprofit health system’s operating loss in stark contrast to its $611 million operating income in 2021. It's a $4.5 billion net loss compared to a net income of $8.1 billion in 2021.
The increase in operating expenses was driven by higher care volumes, higher costs of goods and services and increasing labor costs “due to a highly competitive labor market,” per the announcement.
Total operating revenues were $95.4 billion compared to $93.1 billion in 2021. Total operating expenses, meanwhile, were $96.7 billion compared to $92.5 billion in 2021. Like others, Kaiser suffered from poor investment market conditions, which drove a notable portion ($3.2 billion) of the system’s annual net loss. By contrast, “other income and expenses” saw a gain of $7.5 billion in 2021.
Capital spending at the health system remained steady from the previous year at $3.5 billion. Investing in community health programs went up slightly from $2.6 billion in 2021 to $2.8 billion.
“Rather than pull back amid financial pressures, we made the decision to continue our long-term and strategic investments in care and service improvements while carefully managing resources,” CEO Greg Adams said in a statement accompanying the filing.
Late last year, the system entered a union contract with California Nurses Association, which locked in pay hikes for several years. Kaiser’s contract labor expenses have nearly returned to normal levels, Kaiser Foundation Health Plan’s Corporate Treasurer Tom Meier told Modern Healthcare, thanks to a more streamlined recruiting process and competitive compensation packages.
In 2022, the system saw increased costs related to COVID-19 care and testing, as well as deferred care over the three years of the pandemic, that drove Kaiser’s expenses beyond revenue, according to the announcement. Additionally, the system’s fourth quarter was especially impacted by the "tripledemic," Meier told Modern Healthcare. As a cost-cutting initiative, Kaiser reevaluated vacant positions, cut discretionary spending and reduced administrative costs, he added.