Kaiser Permanente continued to expand its membership in the third quarter, but its expenses grew faster than its membership rates in the period.
The Oakland, Calif.-based health plan and hospital network reported a decrease in operating income, which it attributed in part to keeping its rates affordable (PDF) for members. Rates for 2015 increased at 1.2% on a per-member-per-month basis.
Its health plans, which include individual and group plans as well as Medicare and Medicaid plans, added 40,000 members in the quarter to reach 10.2 million.
Kaiser did not break out utilization statistics for its hospitals.
The system's third-quarter operating surplus fell to $363 million on $15.3 billion in revenue, compared with the prior-year period's $768 million on $14.3 billion in revenue.
The earnings were in contrast to previous results showing slow and steady growth as the system tightly managed its costs.
Kaiser's expense trend for the quarter was 3.9% on a per-member-per-month basis, said Tom Meier, senior vice president and corporate treasurer. The system's financial performance typically looks strongest in the first quarter because membership rates are set on Jan. 1, but costs can continue to trend upward throughout the year. The year-to-date cost trend is 2.5%, he added.
“It was all as expected,” he said. “We planned to have a very strong year and that's exactly what we saw.”
The system also had a tough comparator in 2014, which was an “excellent” year financially, he added.
Kaiser's capital spending in the first nine months of the year totaled $1.9 billion, down from $2.1 billion during the same period last year. Those projects included investments in technology and facilities, such as the recent completion of a radiation oncology therapy center at a hospital in Anaheim, Calif.
Volatility in the financial markets also affected Kaiser's overall financial picture as the system booked a $478 million non-operating loss, which led to an overall net loss for the quarter of $115 million. In contrast, it had non-operating income of $229 million during the third quarter of 2014 and a net surplus for the period of $997 million.
Earlier this month the system disclosed a partnership in which it will take a 20% stake in St. Joseph's Medical Center in Stockton, Calif., with Dignity Health as majority owner.
