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Kaiser Permanente shelves $900M headquarters build

Dive Brief:

  • Kaiser Permanente has decided to shelve its $900 million headquarters project in Oakland due to delays and increasing costs, officials said Tuesday.
  • The integrated healthcare giant planned to build a 29-floor, 1.6 million-square-foot tower in what would have been Oakland’s largest commercial project.
  • The decision wasn’t related to the coronavirus outbreak sweeping the country, according to Kaiser.

Dive Insight:

The plan was scuttled roughly eight months after it was first announced. If completed as planned, the downtown complex would have held 7,000 employees of Kaiser’s national and regional headquarters staff, consolidated from seven sites in Northern California.

“Delays and increasing costs related to this project caused us to reexamine the feasibility and focus on renovating our current buildings,” Kaiser officials said in a statement. “The decision is not related to COVID-19.”

As of Wednesday morning, California had more than 2,600 confirmed cases of COVID-19. Kaiser, the largest employer in Oakland, now plans to stay in its existing offices.

The building, called the Kaiser Permanente Thrive Center, was expected to be completed in 2023. The project was projected to result in roughly $23 million in taxes and fees and another $15 million in annual taxes for Kaiser, but save the integrated health system $60 million annually.

The not-for-profit almost tripled its net income in 2019, raking in $7.4 billion as tax-exempt healthcare providers face increased regulatory scrutiny for mounting profits. Kaiser pledged to invest in infrastructure, while keeping an eye on affordability, at a time when other hospitals struggle with shrinking margins brought on by flagging inpatient admissions and flatlining reimbursements.

Last year, Kaiser opened 17 new medical offices, bringing its total fleet to 712. At the end of the 2019 fiscal year, the system had 95 additional offices in some stage of construction or design that are slated to be finished in the next five years. The 39-hospital health system has a multi-year plan to invest $700 million in opening or renovating 220 locations dedicated to mental health care.

Kaiser lost its long-time CEO, Bernard Tyson, after his unexpected death in November. He was replaced by former EVP and group president Gregory Adams.

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