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Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals Report Fourth Quarter and Fiscal-Year 2008 Results

OAKLAND, Calif., Feb. 13 /PRNewswire/ -- Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals and their subsidiaries (KFHP/H) reported total operating revenue of $10.0 billion for the quarter ended December 31, 2008, compared to $9.6 billion in the same period last year. Operating income was $108 million in the fourth quarter of 2008, compared to a loss of $101 million in the same quarter last year. The difference between the two quarters was primarily due to an adjustment of certain self-insured liabilities in the fourth quarter of 2008. Financial market declines impacted KFHP/H's investment portfolio in the fourth quarter, resulting in a net non- operating loss of $1.1 billion versus net non-operating loss of $132 million in the same quarter last year. As a result, there was a net loss of $996 million in the fourth quarter of 2008 versus a net loss of $233 million in the same period last year.

"Overall, our core operating business performed positively, as we had expected. But as the total economic environment got tougher, we saw losses in our investment portfolio," said Chairman and Chief Executive Officer George Halvorson. "The fallout from the financial markets weighed down our overall results, especially in the latter half of the year."

Total operating revenue for fiscal-year 2008 was $40.3 billion, increasing from $37.8 billion in 2007. Operating income in 2008 was $1.5 billion, compared to $1.7 billion in 2007. The decline of the financial markets resulted in a net non-operating loss of $2.3 billion in 2008, compared to net non-operating income of $498 million in 2007. The non-operating loss in 2008 contributed to a net loss of $794 million for the year, compared to net income of $2.2 billion in 2007.

"In the midst of this continuing recession, we believe that our ability to deliver better care more efficiently will give us a competitive advantage. The new information technology systems we have been implementing during the past several years are enabling us to focus our efforts on our most expensive care delivery areas in ways that both improve care and help us achieve our goal of price trends that are below those of our competitors. We believe the market will value a lower rate of price increases," added Halvorson.

"We continue to follow the financial markets closely and are preparing for additional headwinds," said Executive Vice President and Chief Financial Officer Kathy Lancaster. "With uncertainty lingering in the markets, we are poised to take appropriate actions that limit losses and position us to participate in market recoveries. In addition, we continue to hold a highly diversified and liquid portfolio of investments, which we have marked down to current market values for financial reporting purposes. Over the long run, our portfolio has performed well, and we believe that our investment strategy will meet our long-term goals."

Capital spending in the fourth quarter was nearly $1.1 billion, on par with the fourth quarter of 2007. Similarly, capital spending in 2008 reached $2.9 billion, slightly more than the $2.8 billion reported in 2007. During the past year, KFHP/H opened three new hospitals, a hospital tower, and 10 medical office buildings to meet the needs of members. In 2009, KFHP/H will reduce or defer some capital projects and adjust project timelines where it is prudent to do so.

"During the past several years, we have significantly enhanced our care delivery infrastructure, including our information systems, facilities, and medical technology. These enhancements give our physicians, nurses, labor partners, and other employees the ability to strengthen the quality of our care and service, and manage costs. Capitalizing on our integrated system while making progress with the continuing roll-out of our systems infrastructure will help us emerge from the current economic storm an even stronger leader in health care. As we move in that direction, we will keep focused on our highest priorities, the total health of our members and improving the health of our communities," added Lancaster.

Due to rising unemployment and the financial challenges facing our members and customers, total membership declined by approximately 30,000 members, or 0.3 percent, during the past year. As of December 31, 2008, there were more than 8.6 million members.

Consistent with its not-for-profit mission, KFHP/H uses its resources to support a wide range of community benefit programs. These programs provide care for low-income individuals and support community-based health partnerships, research, training, and community health organizations. In the fourth quarter of this year, a portion of KFHP/H's community benefit activities included 739 community benefit grants and donations. During 2008, KFHP/H provided approximately $1.2 billion to support its broad array of community benefit programs.

"Despite the economic challenges of the past year, we are not losing sight of our ongoing commitment to our communities. Those who are most vulnerable often suffer the most in difficult times such as these. We are working harder than ever to make sure that our community benefit programs provide the greatest tangible value to our communities," said Halvorson.

A leader in the use of information technology to improve health care, KFHP/H continues to expand its electronic health record system KP HealthConnect(TM) and its personal health record My Health Manager. All members can now securely access their personal health records online and communicate with their physicians and clinicians through My Health Manager on In the fourth quarter of 2008, members sent more than 1.6 million secure messages to their Kaiser Permanente physicians and clinicians, filled nearly 1.5 million prescriptions online, and viewed nearly 4.2 million lab test results online. Over the course of the past year, members sent more than 6 million secure messages to their care providers and went online to view more than 16.7 million lab test results.

"We have seen huge increases in the number of members who are adopting and regularly using our electronic health care tools to obtain information and communicate with their health care providers," said Halvorson. "As more members go online with Kaiser Permanente, we are demonstrating the full benefits and unique strengths of our integrated health care model one click at a time."

About Kaiser Permanente

Kaiser Permanente is America's leading integrated health plan. Founded in 1945, the program is headquartered in Oakland, Calif. Kaiser Permanente serves 8.6 million members in nine states and the District of Columbia. Today it encompasses Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals and their subsidiaries, and the Permanente Medical Groups. Nationwide, Kaiser Permanente includes approximately 164,000 technical, administrative and clerical employees and caregivers, and 14,000 physicians representing all specialties. The organization's Labor Management Partnership is the largest such health care partnership in the United States. It governs how more than 130,000 workers, managers, physicians and dentists work together to make Kaiser Permanente the best place to receive care, and the best place to work. In 2007, Kaiser Permanente proudly directed $1 billion to support community benefit programs and services through research, community-based health partnerships, and direct health coverage for low-income families and collaboration with community clinics, health departments and public hospitals. For more Kaiser Permanente news, visit the Kaiser Permanente News Center at:

Except for historical information contained herein, the statements in this release may contain forward-looking statements. Forward-looking statements include, among other things, statements that refer to plans and expectations such as future events and future financial performance. Forward-looking statements involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied by the statements herein based on a number of factors including, but not limited to: the impact of competitor products and pricing; government regulations; health care legislation; changing membership requirements; and the change in economic conditions of the various markets the system serves.


SOURCE Kaiser Permanente
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