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Mar
9

Kaiser profits increase

Kaiser Permanente, one of the oldest and largest HMOs, reported net income for last year increased by 59% to $1.6 billion on revenues of $28 billion. The HMO’s membership (registration required – free) was up slightly to 8.23 million as well.
According to California HealthLine,
“Kaiser officials said the gain in net income was boosted by rate increases, improved operating efficiencies and lower pharmaceutical costs. Unexpected adjustments to pension and post-retirement costs, workers’ compensation and liability expenses also contributed to Kaiser’s financial performance, company officials said.
Tom Meier, vice president and treasurer for Kaiser, said member rates increased by 10% to 11% in 2004, less than the 13% reported in recent years. ”
The message here is we may be approaching, if not already at, the top of the cycle. Stock prices for publicly traded health plans are way up over last year (see Coventry and United HealthGroup), PEs are up as well, and managed care stocks are once again “strong buys.”
A couple of other “take-aways”.
1. Kaiser’s (KP’s) rates were up 10-11% last year, well above overall medical trend rates. This is likely a key to the improved profits, especially when one considers their increased spending on capital expenditures (up 30% as KP tries once again to implement an electronic medical records system).
2. KP operates the tightest form of managed care; the large group model (all docs are members of the Permanente medical group). If their rates are up 10-11%, what does that mean for less-tightly managed models?


Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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