As the pandemic rages on, California healthcare giant Kaiser Permanente’s net income more than doubled to $4.5 billion in the second quarter. Kaiser

Oakland-based Kaiser’s net income in the quarter ended June 30 represented a noteworthy spike from $2 billion in the 2019 period, a change leadership attributed to a greatly improved investment market in the second quarter after a rough first quarter, in which Kaiser posted a $1.1 billion net loss.

“That was all pretty much all recovered in the second quarter of 2020,” said Kaiser’s Treasurer, Tom Meier.

Kaiser’s operating revenue was $22.1 billion in the in the quarter, up 3.3% compared from $21.4 billion in the period-year period. Expenses fell 1.5% to $20 billion in the recently ended quarter.

Operating income grew 90%—by $1 billion—to $2.1 billion. That works out to a 9.4% operating margin in the quarter, compared with 5.2% in the second quarter of 2019. Meier said that’s largely because the system spent less on supplies that would normally be needed for surgeries, which largely weren’t happening.

It’s hard to compare Kaiser to other systems because much of its revenue comes from member premiums. But the health system’s $4.5 billion in net income dwarfed that of the country’s four largest for-profit hospital chains, which together reported $1.5 billion in net income in the second quarter. Their combined revenue of about $20 billion in the quarter was slightly less than Kaiser’s $22.1 billion.

Kaiser’s unique integrated model, where patients pay a membership fee regardless of whether they get care, has served the system well during the crisis, because even as people put off care under California’s stay-at-home order, they still paid their dues. California’s governor implemented the stay-at-home order on March 19, a gradual reopening on May 7 and a partial re-closure on July 13 after cases climbed steadily throughout June and into July. The state now has more than 538,000 positive coronavirus cases.

Meier cautioned that expects to see shifts in membership mix, including possibly more patients who rely on Medicaid. So far, the millions of people who lost their jobs and health insurance due to the pandemic have not yet enrolled in Medicaid.

“The revenue for the most part has been steady coming in through 2020, but what we are going to see is continued unpredictability with the nature of this pandemic,” Meier said.

Membership in health plan stood at 12.4 million as of June 30, up by 183,000 members since the end of 2019.

Spent $900 million on capital projects in the second quarter, up from $710 million in the 2019 period, even as other systems have said they plan to slow or halt capital spending. Meier said that’s because most of the projects are longer term, whether hospital improvements or adding medical office buildings. has 39 hospitals, more than 700 medical offices and more than 50 retail and workplace clinics.

“They’re not things you could just turn off or on at the drop of a dime,” he said.

The capital spending also includes investments in technology and infrastructure to address COVID-related needs, especially expanded telehealth services to serve patients at home, Meier said.

Kaiser

Source: Kaiser Permanente posts $4.5 billion in Q2 net income

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