Kaiser Permanente’s surge in profits suggests it is resilient to COVID-19

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Diving Brief:

  • Kaiser Permanente — one of the few health insurers that also operates its own hospital system — has seen profits increase of $800 million for the third quarter of this year, according to financial documents released Thursday. This is despite the fact that it received no federal funding in response to the COVID-19 pandemic.
  • Unlike other hospital operators, Kaiser appears to have avoided the most severe financial impacts of COVID-19. Although it drew a full $2.4 billion line of credit for its hospitals in April in anticipation of volume losses, it paid off the balance in June.
  • The organization fared relatively well given that its medical expenses increased by nearly $1 billion in the third quarter. That was offset by a $923 million higher gain from its investments of about $43 billion compared to the same quarter a year ago. And Kaiser’s debt burden actually fell slightly as of Sept. 30 compared to Dec. 31 of last year. However, earnings for the first nine months of 2020 are lower than the previous year’s figures.

Overview of the dive:

Buoyed by tens of billions of dollars in revenue from its various health plans and a rebound in investment income, Oakland, Calif.-based Kaiser Permanente has been able to avoid much of the financial hardship suffered by many. other hospital systems that do not have an affiliated insurance operation.

As a result, Kaiser reported net income of just under $2 billion for the third quarter, compared to just under $1.2 billion in the third quarter of 2019. This is a stark contrast to many other hospital operators, who were hit hard earlier this year by the mass cancellation of elective procedures – a phenomenon that is repeating itself as cases of COVID-19 jump up Again. However, some hospital-only systems, such as CommonSpirit Health, have seen their fortunes rise during the third trimester.

Kaiser’s insurance premiums and copayments rose $1 billion to just under $22 billion for the quarter, from $20.9 billion in the third quarter of 2019. Total operating rose $1.2 billion to $21.5 billion from $20.3 billion in the year-ago quarter. Although operating profit fell to $456 million from $615 million in the third quarter of 2019, the gain in investments more than made up for the difference.

Total operating revenue for the quarter was $22 billion, compared to $20.9 billion a year ago.

The nine months ending September 30 tell a different story. Net income was $5.4 billion, compared with $6.4 billion in the first nine months of last year. Much of this can be attributed to anemic returns in investment income, which fell from $2.9 billion a year ago to $1.3 billion.

However, total operating revenue rose to $66.6 billion, up nearly $3 billion from the total of $63.7 billion a year ago, suggesting that the Kaiser’s financial strength could survive the pandemic. Its debt also fell to $21 billion at the end of the third quarter, from $21.6 billion as of December 31.

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