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Kaiser Permanente to cut more than 1,800 jobs in California

The healthcare giant agrees not to cut union members and plans to keep all its physician positions.

August 12, 2009|Tiffany Hsu

One of the state's largest employers, healthcare giant Kaiser Permanente, said it would eliminate more than 1,800 positions as it struggles with drooping membership, uncertain healthcare reform and shriveling Medicare reimbursement rates.

Job reductions will occur within the next few months, the Oakland-based nonprofit said Tuesday. Many of the purged positions -- just under 2% of Kaiser employees -- are temporary, on-call or short-hour. Most Kaiser medical centers in California will be affected.

Kaiser said it would attempt over the next year to transfer employees into other positions, but it is also offering up to a year of severance pay and extended health benefits, as well as buyout offers for volunteers to leave the company.

"We're doing everything we can to minimize the impact on our employees," spokesman Jim Anderson said. "But the job losses in many businesses mean that people have lost their healthcare coverage, which means we've lost them as members."

In Southern California, 650 administrative and service employees out of roughly 56,000 total were notified Tuesday that their positions would be cut, Anderson said. About 1,200 workers in Northern California were told the same.

But none of the people who lose their jobs will be members of SEIU-United Healthcare Workers, which reached an agreement with Kaiser that prevents the company from laying off members of the union.

"We don't think it's necessary to eliminate any positions, given Kaiser's strong financial performance this year," union trustee Dave Regan said in a statement. "We intend to keep pressing . . . Kaiser to maintain the staffing needed to continue providing the highest level of patient care."

With the shaky economy, fewer patients are coming into centers and the revenue stream is slowing, according to a statement from Gay Westfall, a senior vice president with Kaiser Foundation Health Plan and Hospitals, Northern California.

Last week Kaiser said membership had tumbled by nearly 36,000 members to 8.6 million in the first six months of the year.

And although Kaiser Foundation Health Plan Inc., Kaiser Foundation Hospitals and their subsidiaries reported $1.1 billion in net income for that period, nearly double the $601 million from the first six months of 2008, operating profits for the second quarter were only $411 million, down nearly 18% from a year earlier.

Concerns about the effects of a competitive healthcare marketplace and the anticipated reductions in federal funding for healthcare were also a factor in the decision to make the cuts, Anderson said.

Kaiser has already tried to shave costs by deferring merit salary increases, laying off non-union employees, trimming full-time employees through attrition and scaling back hiring, Westfall said. Starting in the spring, it cut nearly 1,000 jobs, and it has canceled 3,000 posted openings since October.

The health insurer has branches in eight other states and the District of Columbia, but Tuesday's cuts will only affect California, Anderson said.

No physician positions are to be eliminated.

More than 3 million subscribers reside in Southern California, according to the Kaiser website. Before recent cuts, there were 14,600 physicians and 167,300 employees spread over Kaiser's 35 medical centers and 431 medical offices. It was the largest private employer in Los Angeles County as of April, just after it opened a $600-million hospital in Hollywood.

Statewide, job losses are beginning to affect the government and healthcare sectors -- two of the few that had seemed resistant to the recession, said Stephen Levy, director and senior economist with the Center for Continuing Study of the California Economy in Palo Alto.

Jobs in the educational and health services sector dropped to roughly 1,743,400 in June, down 900 from a month earlier (but up 19,500 -- more than 1% -- from a year earlier), according to the California Employment Development Department. The number of government jobs fell to roughly 2,505,000 in June, down about 6,700 from a month earlier (and almost 1% from a year earlier).

"The two sources of enduring job growth in California have lost their luster temporarily," he said. "It's kind of unexpected, but it's no different than a company laying off employees when its sales drop."

Federal debate seems to be focusing on how to control the cost of healthcare, while generally agreeing that coverage itself should expand, Levy said.

That will probably bump up demand, he said. "I don't think it's going to be a prolonged dip." --

tiffany.hsu@latimes.com

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