Returning Patients, Continuing COVID Wave Behind Kaiser’s Thin Margins in Q2

Most of Kaiser Permanente’s 12.5 million members returned for medical services after COVID-19 cases declined in the spring and early summer, contributing to an unusually low operating margin in the second quarter of 2021.

Typically, more patients increase the health care system’s bottom line, but Oakland, California-based Kaiser operates differently than most. Patients are also enrolled in a health plan in the integrated system, so Kaiser pays for their care. The operating margin of the system was only 1.5% for the quarter ended June 30, which is significantly lower than 9.4% in the previous period.

The nonprofit Kaiser spent less than usual on healthcare in the second quarter of 2020, a period that includes most of the first wave of the pandemic as much of its operations were halted, said Tom Meyer, corporate treasurer at Kaiser Permanente.

“I would say this quarter is a little higher than normal because we continue to care for people with COVID, as well as vaccinate and test, and return a fair amount of delayed treatment back into the system,” he said.

Kaiser’s operating income for the second quarter of 2021 was $ 349 million, up from approximately $ 2.1 billion in the prior year. High operating profit in the previous quarter was due to government placement orders, which required suppliers to suspend election procedures. The outages have put a strain on most ISPs, Meyer said, but Kaiser has a prepaid model in which members pay the same rate regardless of whether they use the service or not.

“This allows us to improve financial performance because we collected revenue, but did not necessarily incur the associated costs,” he said.

Despite disappointing operating numbers, return on investment boosted Kaiser’s net income to just under $ 3 billion in the recently ended quarter. This is still less than $ 4.5 billion in the 2020 period.

Kaiser’s spending growth in the 2021 quarter compared to the same period last year more than doubled revenue. In the second quarter, expenses rose 16.6% year-over-year to $ 23.3 billion.

In the second quarter of 2021, revenue was $ 23.7 billion, up 7.2% over the same period last year.

Kaiser continues to see more of its members move from commercial plans to Medicaid and Medicare plans due to job losses due to the pandemic, Meyer said. Total membership is up 1.1% – or 141,000 members – over last year, but commercial membership has declined by about 0.5% over that time, while Medicare and Medicaid are up single-digit and single-digit averages. , respectively.

Kaiser spent $ 864 million on capital projects in the recently ended quarter, up from $ 907 the previous year.

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