Kaiser 2022 revenue; $68 billion.
Net income; $925 million.
CEO pay; $13.3 million base and $2.3 million "Other." [1]
Kaiser Foundation Health Plan and Kaiser Foundation Hospitals earned a combined $100 billion in revenue in 2021 [2]. It's the highest-grossing non-profit organization in the USA and probably the world, lol...net income margins are slim though.
That seems like a reasonable amount for the CEO of a massive health care system. Not an easy business to manage and someone who can manage a business that large could do lots of other things. Kaiser is also pretty efficient as far as health care organizations go.
Kaiser is a Colossus, it was more-or-less the first HMO. I've been reading about it in the context of health care economics since the 1980s.
I was getting a test at the hospital in my town the other day and got asked by the technician about my job, which involves public opinion data, and that got into "why are people unhappy with the economy today?" which got into strikes, and she volunteered Kaiser as an example so people like her are very away this is going on.
I am quite sure someone about as competent would do his job for far less. I got this feeling the higher you go the less skill based recruitment is and the more connections and friends matter.
> I got this feeling the higher you go the less skill based recruitment is and the more connections and friends matter.
That’s fact not feeling. There are very few positions at the top and an oversupply of skilled people
willing to fill them.
It becomes a matter of getting favored by the right people…sure executives put in the work but impressing the right people at the right time is how one progresses in the upper echelons.
There is oversupply of people willing to fill high level positions. Problem is that if you want people who have proven that they are skilled (aka successfully held equivalent or higher position at similar company) the pool is much smaller and competition for them is much higher. In addition executive leaving is very disruptive (takes 6+ months to find new one, etc) so you want to pay above average so he does not leave which leads to arms race in salaries.
On what executive mishire can cause just look at recent events at Flexport.
It takes 1+ year to understand that executive is failing and course correction is extremely expensive and disruptive.
Promoting up from within, and grooming successors who started low down the ladder in the company, used to be common.
Now we hire straight in from B-schools at VP or director level, and one of those ends up CEO eventually (if a CEO's not simply hired from outside, directly).
This practice seems to have dramatically increased the cost of executives. I wonder if it's increased quality.
[EDIT] OK not straight from b-school, they have to do a stint in management consulting or whatever first. Because having that be something that the totally inexperienced do makes complete sense.
The idea of hiring straight from B-schools, without experience, tells me B-schools schools have decided to sell out to maximize student throughput. It used to be that very few people got accepted to B-schools without at least a decade or so of experience.
>In addition executive leaving is very disruptive (takes 6+ months to find new one, etc)
Ironically, I read this as an indicator of a bad leader and one who doesn't deserve high pay. A good leader should be regularly training their underlings to make sure there are as few hiccups as possible if they get hit by a bus.
Could you provide a list of names who can/are willing to do it for less? I think our executive recruiting folks (from a lage-cap company) would be more than happy to get some referrals :)
You can say the same thing about professional athletes. Sure, there are bench players in the NBA that would love to start for the Warriors for half of what Steph Curry makes, and they'd probably do a pretty good job. They're amazing basketball players after all. They're likely in the top 1,000 basketball players in the whole world. But they are probably not going to lead the Warriors to a championship. In some situations it's worth paying for that extra little bit of skill+talent.
I'm not sure if that small margin matters for running a major HMO, but I could imagine it does. And that small margin might just be having connections and friends. Maybe having those connections and friends is that extra value proposition that a good CEO brings.
I think a key difference is that sports regularly "tests" performance to help make sure the cream rises to the top. The practice squads are are playing the exact same positions to vie for a starting gig. How many B-squad business types get to head-to-head with an active CEO for long enough to see who's really got the chops?
As a layperson, it seems like the research is mixed as to whether a specific CEO really matters that much to the bottom line. Despite the inconclusive evidence, though, they sure get paid well like it's a given that they really, really matter.
There are other studies that show the opposite though and it's important to not draw strong conclusions from a single study. To quote one study:
"compensation arrangements are endogenous and correlated with many unobservables, measuring their causal effects on behavior and firm value is extremely difficult"
Frydman, C. and Jenter, D., 2010. CEO compensation. Annu. Rev. Financ. Econ., 2(1), pp.75-102.
The difference between Steph Curry and some nba basketball player in the 99.9% percentile actually does matter a lot. And keep in mind hat Curry’s salary is actually lower than his value to a team because of salary cap structures.
Given the wide variation in quality among US healthcare organizations, and the fact that Kaiser has been consistently one of the better ones across most quality metrics, I think you are wrong and are underestimating the challenge involved in both running an organization of Kaiser's size and of recruiting an appropriate person for that role.
I do agree that assessment is less skill based at those levels, but that is largely because the job is not hard skill based. That doesn't mean the person doesn't matter or that they are interchangeable. No one but Steve Jobs could've turned around Apple for example.
> That seems like a reasonable amount for the CEO of a massive health care system. Not an easy business to manage and someone who can manage a business that large could do lots of other things.
As far as US CEO salaries go, I agree that it doesn’t sound particularly egregious.
Compare that with, say, Nintendo’s President, who makes the equivalent of $2.4 million.
Executive pay in the US seems to be high compared to at least Japan. Are US executives really that much better than Japanese executives scored against objective metrics?
Japanese companies did not do very well over the last 20 years (by pretty much any metric) so objectively US executives as a group did significantly better than Japanese executives as a group. In addition you can't talk only CEO salaries without mentioning that salaries in US are overall much higher than in Japan. 13M salary for somebody managing 305k employees sounds very reasonable when senior manager/director (manages 50 people) at tech company makes 1M+.
Compare it to the past US CEO pay then. In the heyday of the American economic boom of the 1960s, the CEO-to-worker pay gap was an order of magnitude lower. What's a bit odd to me is how the social norms have shifted regarding this, to the point where average Americans defend it as just.
Did you adjust for company size? I bet the average s&p 500 company is much larger than they were in the 60s. Doesn't seem strange or unjust to me that a ceo of a $1 trillion market cap company can demand higher pay than one for a $1 billion company.
> Did you adjust for company size? I bet the average s&p 500 company is much larger than they were in the 60s.
If you adjust for company size then you should adjust for inflation as well. I’d be interested in knowing for sure, but if I had to, I’d guess they’re 5-10x, not 1000x, bigger.
As another commenter mentioned, there’s a lot that goes into market cap. The adjusted PE is quite a bit higher than the 1960s, implying the market caps are overvalued by comparison, so I’m not sure market cap is a great proxy.
One other way to measure it is by worker productivity, which has also increased since the 1960s. Somehow those productivity gains are disproportionately hoovered up by management.
US execs seem to be really good at using company money to provide back-scratching favors to board members. Maybe they're less-good at that in other countries, so boards don't reward them as well.
US developer pay is easily 2-3x that of our Western European counterparts. The gap widens tremendously as you move further East in Europe and especially into the middle east, Asia and SE Asia. But you get American developers (myself included) coming out of the woodwork to defend that.
Comparing the President of a Japanese video game company to the CEO of major American healthcare organization with ~6-7x the revenue isn't really an apt comparison, is it?
> Comparing the President of a Japanese video game company to the CEO of major American healthcare organization with ~6-7x the revenue isn't really an apt comparison, is it?
Why wouldn’t it be? And if it’s not, how about a comparison between Sony and KP? Sony’s revenue in 2022 was $88B (though with a much larger net of $6.7B instead of KP’s $0.9B). Sony’s CEO was paid $4.4M.
I also think spinning Nintendo as simply a Japanese video game company undersells their global presence as well as the fact that they build hardware in addition to software. My guess is that Nintendo or Sony have a much greater global presence than KP though I certainly could be wrong.
> If the workers get paid more through this strike, it will translates directly to higher prices.
Has Kaiser not raised prices for health insurance premiums or other fees since 2020? Because that would be notable and they absolutely should lead with that.
My suspicion is they didn't mention that because they have been raising the fees they charge their customers faster than they have been raising wages, like many employers.
Either way, it doesn't matter all that much if their wages aren't keeping pace with inflation. That would almost definitionally lead to the kind of labor shortages described in the article.
I've had the same Medicare advantage plan with Kaiser in Colorado since 2019: My monthly costs for Kaiser, and then for Medicare part B:
2019: 370.50 135.50
2020: 360.50 144.60
2021: 294.50 148.50
2022: 236.50 170.10
2023: 236.50 164.90
2024: 236.50 ??
Before 2019 I had a different plan. I was retired but not yet eligible for medicare. Prices for such pre-medicare plans have increased significantly over this period.
edit fix formatting
The math of health providers is always super sketchy, because they 'donate' their emergency service to the indigent at a non-discounted rate and deduct that from their profits.
Aside from the fact that those non-discounted rates are astronomically high in the USA, they also don't have to worry about anyone analyzing the list of services provided, so the medical billing errors in the provider's favor don't have a chance of being questioned.
Large medical provider accounting is right next to Hollywood accounting in the staggering games played with profit, expense, and loss.
> The math of health providers is always super sketchy, because they 'donate' their emergency service to the indigent at a non-discounted rate and deduct that from their profits.
This makes no sense. If they are the healthcare provider, then services provided to the indigent go in the expenses column, and revenue is in the revenue column.
And you cannot “deduct” anything from profit, it is literally all revenues minus all expenses. And also Kaiser is a non profit.
No, healthcare costs will increase in order to support robust wages and reasonable practitioner patient ratios. Inelastic demand for services that keep people alive do that.
No healthcare CEO or hospital administrator is coming to change your bed pan or put a PICC line in, or stop you from bleeding out in the emergency department or the operating room.
You need to downvote and ignore people who respond with things like "now do X", "relevant username", "get out of here with your facts and logic" and similar Redditisms. The best we can hope for is for the Reddit interlopers to quietly go away.
As a non profit, your goal is to show as little profit as possible. So you play hide the money in board salaries, "outside consultants", executive pay and retirement plans, etc.
Technicality, but Kaiser Permanente is a not-for-profit health plans. I believe it does have part that are non-profit, but in large it is a non-for-profit organization.
> Last month, Kaiser said it was offering “across-the-board wage increases” ranging from roughly 10% to more than 14% over four years
I haven't been able to find this information, but have the Kaiser folks gotten cost-of-living raises since 2020? If not, the raises Kaiser is offering result in a real pay cut vs 2020 wages (although less of a pay cut than they currently are enduring).
My husband works at Kaiser. The " “across-the-board wage increases” ranging from roughly 10% to more than 14% over four years" might refer to the demand that the union had, which was across the board to renew the 4 years contract with 4%/4%/3%/3% which represents indeed 14.3% the 4th year.
There has been several versions 3/3/3/3, 4/4/4/4 over the past 4-5 days. Not sure what is the latest being negotiated today (I should find out later today).
Kaiser tried to break the strike the night before the strike started, by given more, but only to a subset of employees. Which the union rejected.
Thank you for that. If you are comfortable sharing, would these be the first cost-of-living raises since 2020? Or have they been getting 3%-4% raises the last few years?
Different groups inside Kaiser have different contracts. So, I cannot speak for all Kaiser employees.
But in my husband's group, every 4 years, the contract is either re-applied, or goes through negotiation. To keep it simple, due to inflation and relative good results of Kaiser, the union decided to adjust the pay increase for this new contract.
The previous contract did include automatic yearly raise, that were agreed before 2020.
Kaiser just agreed to give 6/5/5/5 so a 22.7% cumulative over 4 years. Now what would be the effective inflation in 4 years, is anyone's guess...
The past 4 years were a cumulative 20.4% in US for perspective.
Healthcare and education are both suffering serious staffing shortages, which of course tend to turn into spirals as bad (straight-up bullshit, really) working conditions drive more workers out.
These have in common that workers are subject to managerial & societal attitudes that they can't say "no" to anything without doing something ethically gross (hurting kids/patients), plus tending to bring more than a little of that attitude to the job all on their own (most of them went into those jobs to help people). In both cases this leads to abuse by management, and suppressed wages.
I suspect pandemic inflation has just accelerated an existing trend of both of those fields—both so dependent on lots of hours from educated-and-skilled labor—getting Baumol's-cost-diseased out of affordability to the middle class. We can't (or won't) pay what it takes to do this stuff right anymore, unless you're rich enough to get out of the systems most folks use, and both will tend to get worse even as they get more expensive (but not more-expensive enough to save them) over the next few years. Barring some major and actually effective automation in those two fields, anyway.
I'm expecting some targeted and aggressive immigration programs for both fields, over the next couple decades. It'll be how we hold this at bay just a little while longer (though we won't improve it—too expensive—just temporarily stop it from getting worse than it's already gotten)
It's the term for what I was expressing. It's fine if you haven't seen it before. At some point, I hadn't either. That's normal.
It means you have to pay more to keep getting the same amount & quality of labor regardless of the financial situation in your own industry, because alternative careers available to the same pool of upcoming workers can pay a lot more than they used to (typically thanks to productivity improvements or technology introducing entirely new types of jobs) while productivity of your own workers hasn't increased much, if any. One expects especially to see it in jobs that can't effectively "scale" labor, despite improvements in technology.
It is, of course, also possible to let quality slip instead of increasing pay. For fields with fairly inelastic demand, like healthcare, you might even get away with it. This is what I expect to see happen in these two fields. I don't think we'll increase pay & improve working conditions enough to maintain a similar level of quality (in the case of education, at least, I think it's already been heading that way for years).
We've kinda tried to fix this, with things like MOOCs (in education), but results haven't been great even under ideal conditions, and some parts of the field (early childhood education) seem especially naturally-resistant to solutions involving technology. Nurses and such are in a similar position—computers and all that jazz have helped some, but not all that much, while productivity and pay for (say) office workers with a decent head on their shoulders have shot up, often alongside less-demanding work, making those more appealing alternatives for young adults choosing a career, or mid-career folks in these fields who finally get fed up and start looking at their options.
>Healthcare and education are both suffering serious staffing shortages
The people who actually do the work like doctors, nurses, and teachers are understaffed. The administrators are very plump. I have multiple friends in education admin and the stories they tell me about nobody is working ever including themselves is disgusting. It's a bunch of people doing nothing and patting themselves on the back about it.
I know one district that, as of a few years ago, had a superintendent and two assistant supers. Each had two secretaries. Was this some monster-sized district? Nah, like six or seven total schools.
I don’t think it’s possible they had nine people’s worth of work between them. Half that, maybe, in a busy week.
61 comments
[ 2.6 ms ] story [ 104 ms ] threadKaiser Foundation Health Plan and Kaiser Foundation Hospitals earned a combined $100 billion in revenue in 2021 [2]. It's the highest-grossing non-profit organization in the USA and probably the world, lol...net income margins are slim though.
1- https://projects.propublica.org/nonprofits/organizations/941.... 2- https://projects.propublica.org/nonprofits/states/CA
I was getting a test at the hospital in my town the other day and got asked by the technician about my job, which involves public opinion data, and that got into "why are people unhappy with the economy today?" which got into strikes, and she volunteered Kaiser as an example so people like her are very away this is going on.
That’s fact not feeling. There are very few positions at the top and an oversupply of skilled people willing to fill them.
It becomes a matter of getting favored by the right people…sure executives put in the work but impressing the right people at the right time is how one progresses in the upper echelons.
On what executive mishire can cause just look at recent events at Flexport. It takes 1+ year to understand that executive is failing and course correction is extremely expensive and disruptive.
Now we hire straight in from B-schools at VP or director level, and one of those ends up CEO eventually (if a CEO's not simply hired from outside, directly).
This practice seems to have dramatically increased the cost of executives. I wonder if it's increased quality.
[EDIT] OK not straight from b-school, they have to do a stint in management consulting or whatever first. Because having that be something that the totally inexperienced do makes complete sense.
Ironically, I read this as an indicator of a bad leader and one who doesn't deserve high pay. A good leader should be regularly training their underlings to make sure there are as few hiccups as possible if they get hit by a bus.
/s
I'm not sure if that small margin matters for running a major HMO, but I could imagine it does. And that small margin might just be having connections and friends. Maybe having those connections and friends is that extra value proposition that a good CEO brings.
As a layperson, it seems like the research is mixed as to whether a specific CEO really matters that much to the bottom line. Despite the inconclusive evidence, though, they sure get paid well like it's a given that they really, really matter.
https://chiefexecutive.net/higher-ceo-pay-produce-better-com...
"compensation arrangements are endogenous and correlated with many unobservables, measuring their causal effects on behavior and firm value is extremely difficult"
Frydman, C. and Jenter, D., 2010. CEO compensation. Annu. Rev. Financ. Econ., 2(1), pp.75-102.
I do agree that assessment is less skill based at those levels, but that is largely because the job is not hard skill based. That doesn't mean the person doesn't matter or that they are interchangeable. No one but Steve Jobs could've turned around Apple for example.
As far as US CEO salaries go, I agree that it doesn’t sound particularly egregious.
Compare that with, say, Nintendo’s President, who makes the equivalent of $2.4 million.
https://www.nintendo.co.jp/ir/pdf/2023/annual2303e.pdf
Executive pay in the US seems to be high compared to at least Japan. Are US executives really that much better than Japanese executives scored against objective metrics?
If you adjust for company size then you should adjust for inflation as well. I’d be interested in knowing for sure, but if I had to, I’d guess they’re 5-10x, not 1000x, bigger.
One other way to measure it is by worker productivity, which has also increased since the 1960s. Somehow those productivity gains are disproportionately hoovered up by management.
At negotiation and price discovery, clearly they are :)
Comparing the President of a Japanese video game company to the CEO of major American healthcare organization with ~6-7x the revenue isn't really an apt comparison, is it?
Why wouldn’t it be? And if it’s not, how about a comparison between Sony and KP? Sony’s revenue in 2022 was $88B (though with a much larger net of $6.7B instead of KP’s $0.9B). Sony’s CEO was paid $4.4M.
https://www.sony.com/en/SonyInfo/IR/library/FY2022_20F_PDF.p...
I also think spinning Nintendo as simply a Japanese video game company undersells their global presence as well as the fact that they build hardware in addition to software. My guess is that Nintendo or Sony have a much greater global presence than KP though I certainly could be wrong.
If the workers get paid more through this strike, it will translates directly to higher prices.
Even after that, Kaiser will stay a low cost provider. Becasue they are non-profit.
Has Kaiser not raised prices for health insurance premiums or other fees since 2020? Because that would be notable and they absolutely should lead with that.
My suspicion is they didn't mention that because they have been raising the fees they charge their customers faster than they have been raising wages, like many employers.
Either way, it doesn't matter all that much if their wages aren't keeping pace with inflation. That would almost definitionally lead to the kind of labor shortages described in the article.
2019: 370.50 135.50
2020: 360.50 144.60
2021: 294.50 148.50
2022: 236.50 170.10
2023: 236.50 164.90
2024: 236.50 ??
Before 2019 I had a different plan. I was retired but not yet eligible for medicare. Prices for such pre-medicare plans have increased significantly over this period. edit fix formatting
Aside from the fact that those non-discounted rates are astronomically high in the USA, they also don't have to worry about anyone analyzing the list of services provided, so the medical billing errors in the provider's favor don't have a chance of being questioned.
Large medical provider accounting is right next to Hollywood accounting in the staggering games played with profit, expense, and loss.
This makes no sense. If they are the healthcare provider, then services provided to the indigent go in the expenses column, and revenue is in the revenue column.
And you cannot “deduct” anything from profit, it is literally all revenues minus all expenses. And also Kaiser is a non profit.
No healthcare CEO or hospital administrator is coming to change your bed pan or put a PICC line in, or stop you from bleeding out in the emergency department or the operating room.
sounds like profit margin is very small and they can go underwater any moment.
Where 80 of revenues had to be spent on healthcare expenses for insurers.
https://www.healthcare.gov/health-care-law-protections/rate-....
Distributing profit through pay, plans and bonuses sound like blatant fraud and they likely trying to avoid it.
I haven't been able to find this information, but have the Kaiser folks gotten cost-of-living raises since 2020? If not, the raises Kaiser is offering result in a real pay cut vs 2020 wages (although less of a pay cut than they currently are enduring).
There has been several versions 3/3/3/3, 4/4/4/4 over the past 4-5 days. Not sure what is the latest being negotiated today (I should find out later today).
Kaiser tried to break the strike the night before the strike started, by given more, but only to a subset of employees. Which the union rejected.
These have in common that workers are subject to managerial & societal attitudes that they can't say "no" to anything without doing something ethically gross (hurting kids/patients), plus tending to bring more than a little of that attitude to the job all on their own (most of them went into those jobs to help people). In both cases this leads to abuse by management, and suppressed wages.
I suspect pandemic inflation has just accelerated an existing trend of both of those fields—both so dependent on lots of hours from educated-and-skilled labor—getting Baumol's-cost-diseased out of affordability to the middle class. We can't (or won't) pay what it takes to do this stuff right anymore, unless you're rich enough to get out of the systems most folks use, and both will tend to get worse even as they get more expensive (but not more-expensive enough to save them) over the next few years. Barring some major and actually effective automation in those two fields, anyway.
I'm expecting some targeted and aggressive immigration programs for both fields, over the next couple decades. It'll be how we hold this at bay just a little while longer (though we won't improve it—too expensive—just temporarily stop it from getting worse than it's already gotten)
Ok, I looked at the Wikipedia page for your gratuitously-verbed jargon.
Wouldn't that phenomenon increase the wages of healthcare and education?
In any case, I'd wager that if you had avoided gratuitously-verbed jargon I wouldn't have had to ask a question.
It means you have to pay more to keep getting the same amount & quality of labor regardless of the financial situation in your own industry, because alternative careers available to the same pool of upcoming workers can pay a lot more than they used to (typically thanks to productivity improvements or technology introducing entirely new types of jobs) while productivity of your own workers hasn't increased much, if any. One expects especially to see it in jobs that can't effectively "scale" labor, despite improvements in technology.
It is, of course, also possible to let quality slip instead of increasing pay. For fields with fairly inelastic demand, like healthcare, you might even get away with it. This is what I expect to see happen in these two fields. I don't think we'll increase pay & improve working conditions enough to maintain a similar level of quality (in the case of education, at least, I think it's already been heading that way for years).
We've kinda tried to fix this, with things like MOOCs (in education), but results haven't been great even under ideal conditions, and some parts of the field (early childhood education) seem especially naturally-resistant to solutions involving technology. Nurses and such are in a similar position—computers and all that jazz have helped some, but not all that much, while productivity and pay for (say) office workers with a decent head on their shoulders have shot up, often alongside less-demanding work, making those more appealing alternatives for young adults choosing a career, or mid-career folks in these fields who finally get fed up and start looking at their options.
The people who actually do the work like doctors, nurses, and teachers are understaffed. The administrators are very plump. I have multiple friends in education admin and the stories they tell me about nobody is working ever including themselves is disgusting. It's a bunch of people doing nothing and patting themselves on the back about it.
I don’t think it’s possible they had nine people’s worth of work between them. Half that, maybe, in a busy week.