Kaiser Permanente, the country's largest health maintenance organization and one that is often held out as a model for President Clinton's health care reform, is coming under attack by critics who say it doesn't provide enough care to poor people to justify its tax-exempt status.
The not-for-profit Kaiser Permanente has been praised for its financial strength while providing health care to large populations through a managed care system. Managed care organizations such as HMOs are touted by many specialists as the way to provide quality care while curbing costs.
But in recent months, California officials and congressional investigators have questioned Kaiser's management, citing the increasing cost of its membership dues and what they characterize as a less-than-adequate role in poor communities despite record income.
Kaiser defends its record, saying it contributes more than $140 million to the community, and $100 million more in free service to the poor.
The criticism comes as the Internal Revenue Service and several states, including California and Texas, are stepping up their scrutiny of nonprofit HMOs, hospitals and other health care providers, and in many cases threatening to revoke their tax-exempt status.
Kaiser ranked first among the nation's 20 largest not-for-profit health care systems, but last in amount of free care provided to the poor, according to a recent survey by Modern Healthcare magazine. At the same time, the cost of joining the HMO in California has risen steadily, making it by Kaiser's own account among the most expensive HMOs in California.
"If you receive tax-exempt status from the public, you should be providing health care services at least equal to the value of that status. If not, maybe you should lose it," said California Assemblyman Johan Klehs (D), chairman of the assembly's tax committee.
In 1992, Kaiser had net income of $796 million on revenue of $11 billion. It serves 6.6 million people, 4.7 million of them in California, the rest in 16 states, including Maryland and Virginia, and in the District.
Today, a subcommitte of the House Energy and Commerce Committe, chaired by Rep. John D. Dingell (D-Mich.), will question Kaiser officials in the first of several hearings that are scheduled to examine not-for-profit HMOs and hospitals.
Earlier this year, Kaiser's record among the poor was questioned by the California agency that authorizes not-for-profit health groups to issue tax-exempt bonds. The agency forced Kaiser to step up services to poor people, through advertising and other means, before allowing the HMO to issue $220 million in bonds.
The California agency that oversees the state's health care program for the poor also has criticized Kaiser, writing that the HMO's service to the poor was not "proportionate to their market strength or penetration."
Kaiser also has come under tough criticism from the Service Employees International Union in Los Angeles, which is locked in a labor dispute with the HMO. The union has been asking California legislators, congressional investigators and anyone else who will listen whether Kaiser deserves its tax-exempt status given its track record in community service. Kaiser discounts the union's criticism as a negotiating tactic.