California Legislature passes transparency bill aimed at Kaiser

Kaiser Permanente may face a new California transparency law targeted at its finances. The state Legislature passed a union-sponsored bill that would force each of the health system’s facilities to disclose its profits.

The state Legislature sent the bill to Democratic Gov. Gavin Newsom’s desk on Monday, where he has 12 days from receiving it to sign it into law. A spokesperson for Newsom said the governor is still evaluating the legislation.

Under the bill, Kaiser would have to change how it releases financial information. Currently the health system lumps the data together for its 35 hospitals in the state, segmenting it only by those in Northern and Southern California.

The hospitals would have to break out their revenue and profits by each facility, and show how much they’re earning from Medicare, Medicaid and private insurance.

Since Kaiser has an integrated health plan, the measure would also require actuarial data to justify rate increases in the Obamacare small group and individual exchange markets. Kaiser health plans would have to report their justifications to the Department of Managed Health Care or the insurance department.

According to the fact sheet by the bill’s author, Democratic California state Sen. Richard Pan, Kaiser’s health plan doesn’t need to publish its own projections for hikes in hospital and physician care costs and prescription drug prices, in order to justify rate increases. Instead, the Kaiser plan only needs to disclose the prior benefit year’s financial results.

In a statement, Kaiser Permanente disputed that it is exempt from any state financial reporting data and said that with “one minor amendment,” the health system could have supported the measure.

Kaiser did not clarify what officials hoped to add to the bill.

“We are disappointed the sponsor of the bill continues to choose conflict over compromise,” Kaiser said. The sponsor referred to in the statement is the major union that spurred the bill, Service Employees International Union California.

Policymakers in states and the federal government have joined the trend to push for pricing transparency from hospitals and health systems. These particular demands on Kaiser are linked to a protracted dispute between the health system and SEIU.

A major labor rift last year pushed SEIU out of union negotiations with Kaiser, and the group then filed a complaint with the National Labor Relations Board. SEIU-United Healthcare Workers West, which falls under SEIU California, also launched and then withdrew a prospective ballot initiative to cap Kaiser’s health plan premium increases.

Since then, the dispute has intensified, and more than 80,000 Kaiser workers from multiple unions and in multiple states and the District of Columbia are preparing to strike in October.

The so-called Coalition of Kaiser Permanente Unions, which includes SEIU, alleged that the health system has shifted from “prioritizing patients and the community to profits and enriching top executives.”

The unions also criticized the $11 billion in profits tax-exempt Kaiser has reported since 2017, and the $16 million salary of CEO Bernard Tyson.