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The Honolulu Advertiser
Posted on: Tuesday, May 17, 2005

Kaiser facing fiscal challenge

By Rick Daysog
Advertiser Staff Writer

The state's second-largest health insurer saw its net income rise 50 percent in the first quarter of the year to $3.9 million, but the profit gain was skewed by a one-time expense a year ago.

Kaiser Foundation Health Plan Hawaii said that its latest results compared favorably with the year-earlier period when the company opted to pay off some of its bonds ahead of schedule.

Kaiser reported yesterday that its operating profit dropped 22.2 percent to $1.4 million for the three months ending March 31 from $1.8 million in the previous first quarter.

The lower operating profit came on first-quarter revenues of $207.2 million, which was up from the year-earlier's $193.1 million. Expenses increased to $205.8 million during the first quarter from $191.3 million in the same period last year.

"Our first-quarter results are less than what we had expected," said Arnold Matsunobu, Kaiser's vice president of finance.

"We are concerned about the higher than expected costs and utilization of care outside our system ... If it becomes a trend we'll be faced with some very difficult choices."

The operating profit translated into a 0.68 percent return on revenues. The company's return on revenues for the first quarter of 2004 was 0.93 percent.

Janice Head, president of Kaiser Permanente Hawaii, said it was "a challenge" to achieve the current operating margin given the continued increase in healthcare costs.

The company opened two new clinics last year and is breaking ground on its new, $68 million Moanalua Medical Center tower next week.

Kaiser said its investment income for the first quarter was $2.5 million, which was up from the year-earlier's $800,000.

The company's 2004 first-quarter investment income was down sharply because of the early payoff of bonds, Matsunobu said.

Reach Rick Daysog at 525-8064 or rdaysog@honoluluadvertiser.com.