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Pandemic slims Kaiser Permanente’s 2020 operating margin

Kaiser Permanente operated on a slightly slimmer margin in 2020 as pandemic-related job losses shifted more of its members from commercial plans to government-sponsored plans.

The Oakland, Calif.-based health system, which consists of Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, generated $2.2 billion in operating income on $88.7 billion in revenue in 2020, or a 2.5{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} margin. That’s compared with $2.7 billion in operating income on $84.5 billion in revenue in 2019, a 3.2{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} margin.

The 5{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} higher revenue year-over-year was due to both rate increases and higher membership, which means more people are paying into the system. Kaiser added 110,000 members in 2020, with total membership growing to 12.4 million. Tom Meier, the health system’s corporate treasurer, said that year-over-year growth is actually lower than is typical.

Kaiser’s expenses grew 5.7{f771d91d784324d4be731abc64bffe0d1fd8f26504ceb311bcfd8e5b001778f4} year-over-year in 2020 to $86.5 billion. Meier chalked that up to medical inflation, more members and COVID-related expenses. Kaiser treated almost 600,000 COVID patients, including inpatient care to 33,000 patients. The health system also administered 4.8 million COVID-19 diagnostic tests and distributed more than 43,000 prevention kids with masks, sanitizer and gloves.

A slightly lower investment performance drove Kaiser’s net income to $6.4 billion in 2020, from $7.4 billion in 2019.

“You would never have thought we would have ended the way we did given how the first quarter performed,” Meier said.

Not-for-profit Kaiser spent $4 billion on capital projects in 2020, up from $3.5 billion in 2019. That’s despite scaling back on several bricks and mortar-type projects due to the pandemic, Meier said. Kaiser’s network includes 723 medical offices, 39 owned and affiliated hospitals and 56 retail and employee clinics.

Telehealth investment, by contrast, continued in full force. Kaiser delivered more than 31 million telehealth visits over the course of the year, which it defines as scheduled telephone and video visits.

Kaiser CEO Greg Adams said in a statement that the health system’s 2020 results reflect the strength of its integrated model amid the “unparalleled challenges” of the COVID pandemic.

“As part of our mission, we found innovative ways to provide high-quality, affordable care to our members and communities equitably and safely while protecting our healthcare workers,” he said.


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