California legislature passes bill requiring Kaiser Permanente to follow financial disclosure laws

Legislation requiring healthcare giant Kaiser Permanente to follow more of the same financial disclosure laws as other healthcare providers in California passed the Senate Monday and now heads to Gov. Gavin Newsom, who has 10 days to decide whether to sign it into law.

The bill, SB 343, would require Kaiser Permanente to provide more data about the revenue and profits of individual hospitals, whereas now it lumps those figures for all facilities into two broad categories: "Northern California" and "Southern California." Of the roughly 400 hospitals operating in California, all but the 35 owned by Kaiser Permanente must comply with financial reporting requirements on a per-facility basis.

WHAT'S THE IMPACT

The new requirements for Kaiser Permanente would include breaking out expenses and revenue at each facility; breaking out revenue by type of payor at each facility (Medicare, Medi-Cal or private insurance); and breaking out rate increases by type of service (hospital, physician services, pharmacy, radiology and laboratory).

For Kaiser Permanente to comply with the legislation, it is estimated it would need to hire two workers to compile and distribute related data on a quarterly basis. The corporation has 250,000 employees and operating revenue of nearly $80 billion.

Kaiser Permanente, despite being a nonprofit healthcare system, has reported $11 billion in profits since Jan. 1, 2017 -- including $5.2 billion just in the first half of 2019. It has made more in profits in the first six months of 2019 than it has ever recorded in an entire year and sits on reserves of more than $37 billion. Meanwhile, premiums for Kaiser patients have gone up year after year as part of a rate-setting process.

With Kaiser controlling more than 65% of insured Californians with large group healthcare coverage, SB 343 would allow employers and others to negotiate fair rates when purchasing health insurance for their workers.

The measure passed the California Assembly 58-13 on Aug. 22, and it is supported by a coalition of healthcare, consumer, business and worker advocates.

Kaiser Permanente did not immediately respond to a request for comment.

THE LARGER TREND

In June, Kaiser Permanente announced plans to construct a new headquarters -- The Kaiser Permanente Thrive Center -- in Oakland, bringing together staff currently spread out across multiple locations. The health system said the impetus behind the $900 million project is reducing annual operating costs and delivering more affordable care and coverage.

Officials say the new downtown Oakland building will reduce operational costs by more than $60 million annually, addressing facilities maintenance, inefficient utility expenses, and rising commercial real estate leases. Reinvesting these savings will help the health system advance its mission of providing quality, affordable care.

ON THE RECORD

"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," said Sen. Richard Pan, D-Sacramento, the author of SB 343. "Employers and individual Kaiser customers deserve to know if they are getting value when Kaiser increases their premiums and copays."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com