Kaiser Permanente posted narrower operating income in the second quarter than a year ago on a modest rise in its medical-loss ratio.
Tom Meier, the not-for-profit's senior vice president and corporate treasurer said last year's second quarter exceeded expectations for membership growth and income, making this year's second quarter a difficult comparison. In the first half of 2016, membership grew by 362,000 to a total of 10.6 million. The health plan added 524,000 members in the first half of last year.
Meier said Kaiser costs rose 0.8% in the second quarter and 1.9% in the first half. That compares with a more general healthcare cost industrywide of 4% to 5%, he said. The favorable cost trend, he said, helps to keep insurance rates in check.
In the second quarter, Kaiser reported operating income of $491 million on revenue of $15.8 billion compared with operating income of $760 million on revenue of $15.3 million in the year-ago quarter, Kaiser said Friday in a release.
Oakland, Calif.-based Kaiser is the nation's largest not-for-profit health system by revenue. The system, which operates 38 hospitals, opened four medical office buildings in the second quarter, bringing the national number of facilities to 630.
Kaiser's net income in the second quarter was $707 million compared with $1 billion in the year-earlier quarter. The net reflects the lower operating income in the 2016 second quarter as well as slightly lower investment income from the year-ago period.
Kaiser reported net non-operating income of $216 million in the second quarter of 2016, compared with $248 million in the same quarter of 2015.
Meier said Kaiser's investment portfolio is producing a solid 3.3% return. The system can post fluctuations on investment income each quarter because it books only realized gains and losses, meaning that only investment instruments sold during the quarter are reflected as income.
Paper gains in the portfolio are unrealized. “We're very pleased with our total return,” Meier said.
