Partners HealthCare reported $29.8 million in operating surplus in its fiscal year's third quarter as its insurance division continued to recover from higher-than-expected medical claims.
The Boston-based system saw a 22.8% rise in premium revenue for its Neighborhood Health Plan in the quarter ended June 30 over the same quarter last year, driven by a 19% increase in membership in the Medicaid managed-care plan. Expenses from medical claims dropped 1% year over year.
The system set aside a $92 million reserve last year to avoid an operating loss from medical claims. Insurance activity, though, still netted a 3% operating loss in the third quarter of 2015, but that was an improvement from the 14.9% loss the division suffered in the third quarter of 2014.
Still, Partners' Neighborhood Health Plan isn't out of the woods. The system is bracing for the completion of Massachusetts' ongoing Medicaid redetermination process, which the state initiated earlier this year and is expected to complete by December. The state is looking for $761 million in savings for MassHealth, the government-run health insurance program for 1.7 million poor and disabled residents, and so far has removed tens of thousands of people from its Medicaid rolls.
Most of those people will qualify for subsidized coverage on the state's exchange, but the process has contributed to volatility among Neighborhood Health Plan membership, the system said. If the process results in the termination of a portion of Neighborhood Health Plan's relatively healthier members, it could have a detrimental impact on the plan's medical-loss ratio in fiscal 2015.
The 12-hospital integrated system saw a smaller operating margin on the provider side during the quarter, reporting a 1% operating margin compared with a 2.3% operating margin in 2014. Net patient service revenue, however, increased 3.4%. Discharges were up 4.1%, and emergency room visits increased 0.3%.
Operating expenses increased 6% because of labor costs associated with the implementation of Partners eCare, an integrated, electronic health and administrative information system. Pension expenses increased 18% over the third quarter of 2014.
Partners also said it absorbed $305 million in costs from uncompensated care, an increase of $49 million over the shortfall absorbed in the prior-year period.