Due to numerous delays and cost increases, West Coast healthcare giant Kaiser Permanente has canceled plans for a $900 million headquarters, which was to be located in Oakland, California.
While at first blush the timing of the announcement seems related to the ongoing COVID-19 coronavirus crisis bringing the globe to a standstill, a Kaiser Permanente representative said in a statement that this is not the case.
"Delays and increasing costs related to this project caused us to re-examine the feasibility and focus on renovating our current buildings," the statement read. "The decision is not related to COVID-19. Kaiser Permanente appreciates the hard work by the developer and its team on the 2100 Telegraph Avenue project. We wish them well with the project and look forward to welcoming new neighbors to downtown Oakland when it's completed."
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The ongoing coronavirus situation has brought normal life in the Oakland area to a halt, and Kaiser, like all health systems and hospital operators, is focused on what is expected to be an influx of thousands of new patients as the virus continues to spread.
WHAT'S THE IMPACT?
Kaiser Permanente first announced plans for the $900 million project in June 2019. The health system said at the time that the impetus behind the project was reducing annual operating costs and delivering more affordable care and coverage.
The now-canceled building was expected to reduce operational costs by more than $60 million annually, addressing facilities maintenance, inefficient utility expenses, and rising commercial real estate leases.
According to the San Francisco Business Times, Kaiser's plan was to consolidate roughly 7,200 employees from its disparate national and regional headquarters into one building.
The nonprofit health giant posted total revenue last year of $84 billion, while net income was $7.4 billion. The system boasts about 12 million members across the country, though most are located in California.
The Mercury News reports that Kaiser Permanente will still retain a headquarters in Oakland. But Lane Partners, the developer tasked with bringing the project to fruition, now has to attempt to find a tenant for the site, which could house anywhere between 8,000 to 10,000 office workers.
THE LARGER TREND
Kaiser Permanente has long engaged in activity aimed at benefiting the larger Oakland region. In December 2018, the health system committed roughly $1.65 million to support relief and recovery efforts in communities impacted by California wildfires, with the money paid out through multiple gifts to various organizations, including the American Red Cross, the United Way of Greater Los Angeles and the Ventura County Community Foundation.