Business

Kaiser outsourcing deal leads to job cuts

The layoffs are the latest and largest of several over the last few months. In addition, executives at some plans have taken pay cuts.

By Emily Berry — Posted April 1, 2009

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Kaiser Permanente announced March 16 that it would outsource the management and storage of most of its data to IBM, eliminating about 700 jobs at Kaiser.

The same day the seven-year deal was announced, Kaiser said it would eliminate 160 other information technology jobs in more than 30 locations across the country "as part of a realignment of its information technology function," according to a company statement.

None of the positions were in areas that would affect patients or physicians, Kaiser spokeswoman Laura Dunn said in an e-mailed statement.

The company's electronic health records system, Kaiser Permanente HealthConnect, which the company said is used by 14,000 doctors every day, will remain under Kaiser's management, a company statement said.

Kaiser will see a "modest cost benefit" from the IBM arrangement, but it was done mostly to improve the quality of service to members, Dunn said.

The insurer has about 160,000 employees across the country, she said.

Although it represents less than 1% of its work force, Kaiser's elimination of 860 jobs is only the latest cutback in labor costs across the industry over the past several months.

After cuts at WellPoint and UnitedHealth Group that began in 2008, Blues plans in Michigan, Massachusetts and New York also cut jobs or reduced pay for both workers and executives.

Excellus BlueCross BlueShield, based in Rochester, N.Y., laid off 50 people in February as part of a "reorganization to achieve greater efficiencies," according to a company statement. The layoffs represent about 1.4% of its work force.

Michigan's Blues plan announced in January that it would eliminate as many as 1,000 jobs -- about 10% of its staff -- in 2009 because of losses in its individual insurance business.

Blue Cross Blue Shield of Massachusetts Chair and CEO Cleve Killingsworth was among the plan's employees who took a pay hit: His 2009 base salary and incentive pay took an almost 50% drop from what it was in 2008 -- down from $3.6 million to $1.8 million, said company spokesman Jay McQuaide.

Other executives took an average 30% cut in compensation. The incentive plan for all employees was cut by 20%, and the company is under an overall salary and hiring freeze, McQuaide said. Massachusetts Medical Society President Bruce Auerbach, MD, an emergency physician who practices in Attleboro, in a statement said, "Any steps taken to reduce health care costs are welcome measures."

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