Rising costs drag down Kaiser's net income
The HMO reports net income of $1.5 million in the third quarter
KAISER PERMANENTE Hawaii, the state's largest health maintenance organization, posted a 65.1 percent drop in third-quarter net income as a lack of available hospital beds and the cost of outside services led to higher operating expenses.
Kaiser, whose 226,000 members rank it the state's second-largest health insurer behind Hawaii Medical Service Association, had a net gain of $1.5 million compared with $4.3 million a year earlier. Revenue rose 5.9 percent to $209 million from $197.4 million.
But the revenue gain was more than depleted by an 8.4 percent rise in operating expenses to $210.7 million from $194.4 million. That resulted in Kaiser suffering a $1.7 million operating loss, or minus 0.8 percent of revenue, compared with year-earlier operating income of $3 million, or 1.5 percent of revenue.
"We remain concerned about our expenses," said Arnold Matsunobu, Kaiser's vice president of finance. "We are in the process of implementing solutions, which will allow essential capital projects to remain on schedule."
The HMO's new Moanalua Medical Center tower, which broke ground in May, will increase hospital bed capacity when it opens in 2009. Kaiser also announced last quarter it would close its Kailua clinic and expand facilities at its nearby Koolau clinic in Kaneohe. The move is expected to occur in 2008.
Earlier this year, Kaiser requested approval from the state Insurance Division for a 3 percent average rate increase starting in 2006. It would be the HMO's smallest rate increase in six years. A decision from state Insurance Commissioner J.P. Schmidt is still pending.
Kaiser is taking several approaches to work on its costs and expects to see the impact by year-end, President Jan Head said. "Currently, we are only filling vacant positions that are essential to maintain Kaiser Permanente's high quality of care and patient safety," Head said.
Kaiser also plans to bring additional beds into the hospital so that the HMO doesn't have to absorb the costs of patients being sent to other facilities.
The nonprofit, which operates 17 outpatient clinics statewide and one hospital, expects operational efficiencies to improve due of recent investments in new clinics and KP HealthConnect online, an automated medical records system
Kaiser had investment income of $1.3 million last quarter, an amount that was in line with its historical performance.
For the first nine months of the year, Kaiser's net income was off 46.7 percent to $4.8 million from $9 million a year earlier. Through three quarters, Kaiser had an operating loss of $1.9 million this year compared with $6 million in 2004.