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Kaiser Foundation Health Plan and Hospitals Reports Fourth Quarter and Fiscal Year-End 2007 Financial Results

Results support investments in Kaiser Permanente care delivery system and

ongoing community benefit programs

OAKLAND, Calif., Feb. 14 /PRNewswire/ -- Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals and their subsidiaries (KFHP/H) today reported total operating revenue for the fourth quarter ended December 31, 2007 of $9.6 billion which compares to $8.7 billion for the fourth quarter of 2006, and a net loss of $233 million for the quarter versus net income of $215 million in the fourth quarter of 2006. The company realized an operating loss of $101 million for the fourth quarter versus operating profit of $97 million in 2006, and a non-operating loss of $132 million versus non-operating income in fourth quarter 2006 of $118 million.

Items impacting fourth quarter net loss include additional expenses associated with the opening of new facilities, higher retirement costs, other increases in hospital and medical costs, and increased spending for community benefit programs. Approximately $350 million of the reduction in net income for the fourth quarter was due to a tightening of the organization's criteria for recognizing impairment losses on its investment portfolio.

Total revenue for the year, ended December 31, 2007, was $37.8 billion, which compares to $34.4 billion in 2006. Operating income was $1.7 billion in 2007, or 4.6 percent of operating revenue, compared to $965 million in 2006, or 2.8 percent of operating revenue. Net income for 2007 was $2.2 billion compared to $1.4 billion in 2006. Non-operating income was $498 million compared to $387 million in the prior year. As reflected in the organization's second quarter 2007 earnings release, net income was favorably impacted by a $356 million reduction in reserves for professional liability and worker's compensation.

Capital spending in 2007, designed to enhance KFHP/H's health care systems, technology, facilities, and health programs and services, continued at a pace similar to last year at $2.8 billion. Also in 2007, KFHP/H provided an estimated $1 billion to fund community benefit programs, which compares to $807 million in 2006. Kaiser Permanente membership increased by approximately 13,000 members in 2007 to nearly 8.7 million members.

"Our financial performance allows us to continue to fund our care system construction projects, as well as our computer system infrastructure improvements, our care efficiency and process improvements, and our expanded community benefit agenda," said KFHP/H Chairman and Chief Executive Officer, George C. Halvorson. "In addition, a combination of seismic upgrade projects for our hospitals and a number of facility upgrades and care site improvements are needed to meet our members' expectations for care delivery and service."

In 2007, Kaiser Permanente expanded and opened five new hospitals and seven medical office buildings. The organization's strategic facility program has helped support innovations in patient, environmental, and workplace safety. The organization's construction plan for 2008 includes three new hospital projects, two major hospital tower additions, ten medical office buildings, and four substantial renovations.

"We continue to make investments in technology and improve operations which help to enhance care and manage costs," said Executive Vice President and Chief Financial, Officer Kathy Lancaster. "We anticipate that 2008 will be a challenging year for all of health care, but we remain committed to continued improvements in order to reduce the rate of increases to premiums."

In line with its commitment to community benefit, Kaiser Permanente's enrollment of uninsured persons in its Charitable Coverage program grew to almost 90,000 members in 2007. The organization sponsored the Center for Health Care Strategies' (CHCS) breakthrough work for managing the health of Medicaid recipients with multiple chronic conditions, expanded its Healthy Eating Active Living (HEAL) program to 28 sites, and funded the establishment of national quality centers for public hospitals and community health centers.

Kaiser Permanente's electronic health record project, KP HealthConnect(TM), is producing benefits toward improving quality, service, and patient safety. In April 2008, the organization will complete its ambulatory electronic health record implementation, making outpatient medical records available for all of its approximately 8.7 million members. In addition, all members can now securely access their personal health records and communicate with their physicians through Members currently visit the site over one million times per month to manage their health online. A recent study of Kaiser Permanente's experience was published in the American Journal of Managed Care and showed that patients with online access to a personal health record are choosing to use secure e-mail. The study illustrates how Web-based options are playing a larger role in doctor-patient interaction and are contributing to the total health and service satisfaction of Kaiser Permanente's members. In addition, with KP HealthConnect in place, the organization was able to ensure continuity of care for members affected by the recent Southern California wildfires even as members and staff were redirected to alternate medical centers.

About Kaiser Permanente

Kaiser Permanente is America's leading integrated health plan. Founded in 1945, it is a not-for-profit; group practice prepayment program headquartered in Oakland, Calif. Kaiser Permanente serves the health care needs of nearly 8.7 million members in nine states and the District of Columbia. Today it encompasses the not-for-profit Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals and their subsidiaries, and the for-profit Permanente Medical Groups. Nationwide, Kaiser Permanente includes approximately 160,000 technical, administrative and clerical employees and caregivers, and more than 13,000 physicians representing all specialties. The organization's health care Labor Management Partnership is the largest 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. For more Kaiser Permanente news, visit the KP News Center at:

Except for historical information contained herein, the matters discussed in this media release are forward-looking statements that involve risks and uncertainties. Actual results may vary significantly based on a number of factors including, but not limited to: the impact of competitive products and pricing; government regulations; health care legislation; changing membership requirements, and the change in economic conditions of the various markets the organization serves.

SOURCE Kaiser Foundation Health Plan, Inc.
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