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Where do Kaiser Permanente's profits go?

Kaiser Permanente operates as a “not-for-profit” organ­i­za­tion. Note: “not for profit” isn't the same thing as “charitable”. The phrase means that profits are not distributed to shareholders but are invested in the organ­i­za­tion itself instead.

The investment can include substantial com­pen­sa­tion for leadership.

In the case of Kaiser Permanente, leadership com­pen­sa­tion has been a topic of dis­cus­sion, particularly regarding whether it is excessive.

As of 2024, the com­pen­sa­tion for top executives at Kaiser Permanente included substantial salaries.

For instance, the CEO, Gregory Adams, received $15.56 million in total com­pen­sa­tion in a recent year, while other executives like Arthur Southam and Kathryn Lancaster earned around $5.22 million and $5.03 million respectively.

Investment of profits includes literal investments. In 2008, Kaiser disclosed the following details in this context:

Investments include investments in equity, U.S. Treasury, government agencies, and other marketable debt securities and are reported at fair value. Alternative investments are carried at the equity method which approximates fair value. Certain investments are not liquid and are valued based on the most current information available. Interest and dividend income, as well as recognized gains and losses, which are recorded on the spe­ci­fic identification basis, are included in investment income (loss) - net.

There is an interesting point related to one type of investment. Kaiser makes loans to other “institutions”. Kaiser frames this as charitable community investments and broad support for small businesses. However, one AI claims that details related to exactly who receives the loans and the terms and interest rates that are presently used are “not readily available”.

Review of Kaiser's financial statements may provide more information. Such statements as are publicly available will be added to this site.

In 2008, Kaiser offered the following comments on the subject of loans to other institutions:

Health Plans and Hospitals enter into Securities Lending agreements whereby certain securities from their portfolios are loaned to other institutions.

Securities lent under such agreements remain in the portfolios of Health Plans and Hospitals. Health Plans and Hospitals receive a fee from the borrower under these agreements which is recognized ratably over the period that the securities are lent.

Collateral, primarily cash, is required at a rate of 102% of the fair value of securities lent and is carried on the balance sheet as Securities Lending Collateral. The obligation of Health Plans and Hospitals to return the cash collateral is carried on the balance sheet as Securities Lending Payable.

The fair value of securities lending collateral is determined using level 1 or 2 inputs as appropriate, as defined by Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements.

The fair value of the loaned securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned securities fluctuates.

Source: DMHC again. For a more complete analysis, see the two PDFS linked further up.

Profits go to retirement plans as well. In 2008, Kaiser disclosed the following details in this context:

(12) Physicians’ Retirement Plan

Kaiser Foundation Health Plan, Inc. provides defined retirement and disability benefits for phy­si­cians associated with certain Medical Groups. Benefits are determined based on the length of service and level of com­pen­sa­tion of each par­ti­ci­pant. The plan is unfunded and is not subject to the Employee Retirement Income Security Act of 1974.

Although this plan does not qualify as an employee benefit plan, the liability has been sub­stan­tial­ly calculated in accordance with the provisions of SFAS No. 158, and net worth has been debited accordingly. For purpose of this calculation, assets desig­na­ted by man­age­ment for liabilities of the phy­si­cians' retirement plan are treated as if they were qualified plan assets.

Source: DMHC again. For a more complete analysis, see the two PDFS linked further up.