Kaiser Ignores Benefits to Patients, Abuses Nonprofit Status, to Enrich Itself, Says CAO

By Kevin Koeninger, Courthouse News Service

OAKLAND, Calif. (CN) - Kaiser Foundation Health Plan's former Chief Administrative Officer claims she was fired for protesting that the putative nonprofit was "funneling funds to related for-profit Kaiser entities ... not focusing on providing benefits to patients and the community and instead using its fraudulently obtained tax-exempt status to fuel its market expansion/dominance."

In her complaint in Alameda County Court, Carrie Harris-Muller says she rose quickly to high-level management positions after starting her career with Kaiser more than 10 ten years ago. She was promoted to CAO in 2008, where her work included "maintaining and assessing the risk of losing Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals 501(c)(3) tax-exempt status as a charitable organization."

Harris-Muller claims she had told Kaiser since 2007 that it was "not maintaining an appropriate threshold of revenue to meet its 501(c)(3) obligations of providing benefits to the community." When Kaiser's Mid-Atlantic region spent just 2.5 percent of its revenue on community benefits in 2010, Harris-Muller says, the paltry number "was actually an increase over the community benefits provided in prior years."

Even before her promotion to CAO, Harris-Muller says, she expressed concerns about the companies' tax-exempt status, saying that "these entities needed to focus on providing benefits to the communities and patients, instead of focusing so heavily on using the billions of dollars in benefits from its tax-exempt status to fuel its market expansion/dominance and increase profits.

"In 2008, plaintiff reported to Kaiser that it was spending funds in an unjustified manner, including the Kaiser Permanente's Platinum Circle event in Hawaii."

Citing company literature, she says that event featured "complimentary airfare and accommodations for two at a luxury Fairmont resort, where you'll mingle with senior Kaiser Permanents executives and your counterparts from around the country. There will be plenty of time for snorkeling, golf, a spa treatment, or just relaxing."

Harris-Muller says that from 2007 until she was fired, she "reported to Kaiser that it was not maintaining an appropriate threshold of revenue to meet its 501(c)(3) obligations of providing benefits to the community. This was a major and growing concern for Kaiser. For example, in 2010, plaintiff reported to her superiors that Kaiser's Mid-Atlantic region only used 2.5 percent of its revenues to provide community benefits, which was actually an increase over the community benefits provided in prior years. ...

"Moreover, Kaiser's Mid-Atlantic was not providing any care to indigents or uninsured people - it only provides care to Kaiser members and is not a Medicaid participating health plan. By comparison, an IRS study of 544 nonprofit hospitals provided that 'the average and median percentages of total revenues reported as spent on aggregate community benefit expenditures were 9 percent and 6 percent, respectively, for the overall group.'"

Even though surplus profits for Kaiser grew to more than $5 billion and the company "failed to come anywhere near the threshold level of community benefits provided by other hospitals, Kaiser still compensated its executives, who were responsible for overseeing the provision of community benefits, at approximately 110 percent of their target bonuses," according to the complaint.

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Full Text of Lawsuit:

Similar Accusations from:

• National Union of Healthcare Workers: LINK
• California Nurses Association: LINK