Kaiser halves quarterly loss

The health insurer's effort to restructure is bringing costs in line with revenue

Kaiser Permanente Hawaii cut its fourth-quarter loss nearly in half to $2.9 million from the year-ago period as it continued restructuring its operations to bring expenses more in line with revenue.

The state's second-largest health insurer, which lost $5.3 million in the fourth quarter of 2005, said yesterday its cost-cutting program that began more than a year ago -- including 54 layoffs announced in November -- is starting to pay off.

For the year, Kaiser posted net income of $5.5 million, as opposed to a loss of $500,000 in 2005.

"We are pleased that the restructuring efforts that began in late 2005 have resulted in progress towards reducing our overall cost trend," said Susan Murray, acting regional president for Kaiser Permanente Hawaii.

Murray has been filling in for Jan Head, who stepped down in January. Janet Liang, formerly the executive vice president of the Columbia Region at Seattle-based Group Health Cooperative, will take over at Kaiser on Monday. The nonprofit health-maintenance organization also said it is in final negotiations with a permanent chief financial officer to replace Arnold Matsunobu, who retired last year.

Kaiser, whose bed shortage has forced it to absorb higher expenses by sending some members to outside hospitals, said yesterday construction of the $150 million new tower at Moanalua Medical Center on Oahu and existing hospital renovation is within budget and on schedule to be completed next year. The new center will offer members a larger, more personalized mother-baby unit as well as 106 new beds and additional operating suites.

The medical provider, which raised premiums an average of 3.75 percent at the beginning of this year, said its restructuring efforts will continue through this year.

The restructuring came to a head last November, when Kaiser announced it was laying off 54 employees, consolidating departments and eliminating 2007 merit increases. Other cost-saving initiatives that Kaiser earlier implemented include holding vacant positions open, limiting travel and expenses, consolidating property and reviewing all contractual agreements.

Fourth-quarter operating revenue -- dues collected from Kaiser's 223,000 members -- rose 2.1 percent to $210.3 million from $206 million a year ago while operating expenses rose 1.4 percent to $217.3 million from $214.2 million. Kaiser's net return on revenue was a negative 1.4 percent compared with a negative 2.5 percent a year ago. Operating income narrowed to a negative $7 million from a negative $8.2 million.

Investment income rose 41.4 percent to $4.1 million from $2.9 million.

"The positive net investment income and the sale of property contributed to a positive net income for the year," said acting Chief Financial Officer Lance Ohira. "The health care arena will see more challenges in 2007 as Medicare reimbursements grow at a slower rate than the rapidly increasing cost of providing the medical care."

For the year, revenue rose 3.9 percent to $862.6 million, or a 0.6 percent net return on revenue, from a year-earlier $830 million, or a negative 0.1 percent return of net revenue.

Operating expenses increased 3.5 percent to $869.8 percent from $840.2 million.

Net investment income jumped 30.9 percent to $12.7 million from $9.7 million.

Operating income narrowed to a negative $7.2 million from a negative $10.2 million.

Kaiser has 18 clinics on Oahu, Maui and the Big Island in addition to the Moanalua Medical Center.