Kaiser Permanente, Oakland, Calif., saw its year-end profits rise more than 14-fold thanks mainly to double-digit premium increases. The nation's largest not-for-profit HMO posted net income of $996 million and an operating margin of 3.9% in 2003. That's up from net income of $70 million and an operating margin of 0.6% in 2002, when the company wrote off a $442 million investment in a failed effort to build an automated medical records system. Revenue rose 12% to $25.3 billion, despite a 2% drop in enrollment to 8.2 million members. For the fourth quarter of 2003, net income was $154 million, compared with a $525 million loss in the year-ago quarter. Revenue rose 10% to $6.4 billion.
Separately, a new report said the nation's HMOs reported combined profits in the first six months of 2003 were $4.3 billion, up 73.3% from $2.5 billion in the 2002 period. Some 44% of HMOs received financial-strength ratings of excellent or good in the second quarter of 2003, up from 20.8% at the end of 1998, according to Weiss Ratings. The percentage of HMOs receiving weak ratings declined more than half, to 18% at the end of the second quarter from nearly 40% in 1998. "Aside from the obvious -- increased premiums -- the impressive performance reported by HMOs reveals how successful the industry has been in streamlining operations and eliminating unprofitable business lines," Weiss Ratings Vice President Melissa Gannon said. -- by Laura B. Benko