Kaiser lost $500,000 in 2005

Kaiser Permanente Hawaii, the state's largest health maintenance organization, lost $5.3 million in the fourth quarter after taking a $6.2 million one-time financial adjustment for additional Medicare payments paid to outside hospitals.

Arnold Matsunobu, Kaiser's vice president of finance, said the retroactive payments that covered the last four years were primarily made to neighbor island hospitals that accepted Kaiser's Medicare patients. Kaiser has 18 clinics statewide but does not have hospitals on the neighbor islands.

The fourth-quarter loss left Kaiser with a $500,000 loss for the year.

Kaiser, hampered by a continuing hospital bed shortage, is addressing that with a $150 million tower expansion at its Moanalua Medical Center on Oahu. The tower expansion, which broke ground in May, will add 72 beds after it is completed in 2009. Last quarter's $6.2 million adjustment was not related to Kaiser's bed shortage, Matsunobu said.

Nevertheless, the nonprofit organization, which increased membership dues 3 percent on Jan. 1, said operating expenses once again outpaced revenue in the quarter and underscored the need for more hospital beds.

"The new tower is essential to our future growth as it will add much-needed hospital beds and offer improved medical technologies to our members," Kaiser President Jan Head said yesterday.

"Kaiser Permanente is taking immediate action to address the challenges facing us today as we continue to invest in improving care and service for our members."

Last year, Kaiser began encouraging non-Kaiser members who previously were accepted as patients to see other physicians under the nonmembers' plans.

"We're strapped with capacity and we don't turn away our members, so until we build our capacity back, we're asking nonmembers to see physicians under their insurance plans," Matsunobu said.

Kaiser, whose 226,000 members rank it as the second-largest overall insurer in Hawaii behind Hawaii Medical Service Association, had net income of $2.2 million in the year-earlier quarter and $11.3 million for all of 2004.

"Managing our costs for hospitalization, both inside and outside of Kaiser Permanente, was a tremendous challenge for the organization through 2005," Head said. "Creating more capacity at our hospital is critical in resolving this issue. It's a priority to have enough hospital beds to accommodate our members when they require inpatient care."

Operating revenue last quarter rose 2.6 percent to $206 million from $200.8 million a year earlier while operating expenses increased 6.3 percent to $214.2 million from $201.5 million.

For the year, operating revenue gained 5.5 percent to $830 million from $786.4 million in 2004 while operating expenses rose 7.6 percent to $840.2 million from $781 million.

Kaiser had an operating loss last quarter of $8.2 million, compared with an operating loss of $700,000 a year ago. For all of 2005, Kaiser swung to an operating loss of $10.2 million from an operating gain in 2004 of $5.4 million.

"Increasing pharmaceutical and medical technology costs and shifting population demographics were among the primary obstacles facing (Kaiser) in 2005," Head said.

Net investment income last quarter was $2.9 million and matched the year-earlier period. For the year, investment income jumped 64.4 percent to $9.7 million from $5.9 million

"Our investment income helped to moderate our operating losses for the year," Matsunobu said.

Head said operational efficiencies will improve due to the recent implementation of KP HealthConnect online, an automated medical records system.

Kaiser, which has been in Hawaii for 45 years, has 420 physicians and 3,800 employees.