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The Honolulu Advertiser
Posted on: Wednesday, March 5, 2008

Kaiser posts profit; HMSA loses $22.6M

By Greg Wiles
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

It was a good year for Kaiser Permanente Hawaii and its clinics and hospitals. The state's second-largest health insurer reported ending 2007 with 222,000 members.

DEBORAH BOOKER | The Honolulu Advertiser

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The state's two largest health plans reported disparate fourth-quarter financial results as Hawaii Medical Service Association swung to a net loss while Kaiser Permanente Hawaii had a profit.

The Hawaii Medical Service Association reported a net loss of $6.63 million for the three months ended Dec. 31 as dues revenue fell faster than HMSA could cut back on administrative expenses. A year earlier the state's largest healthcare insurer had reported net income of $4.03 million.

Both HMSA and Kaiser have faced rising medical care costs from a variety of factors ranging from more people using more medical services to higher drug costs. HMSA's dues revenue fell to $362.3 million, or 21 percent less than a year earlier, as one of its customers began self-insuring.

It also said it has been increasing the amount of dues it pays out to physicians, hospitals and other service providers. In the fourth quarter this amounted to 94.5 percent of dues revenue, or above its historic rate of 93 percent.

The loss was the fourth straight quarter HMSA reported losing money. For the year the insurer said it had a net loss of $22.6 million. That compared with a net income of $17.8 million in 2006.

Kaiser said its efforts to rein in costs were beginning to pay off and reported a net profit of $4.6 million for the fourth quarter. A year earlier it had a net loss of $2.9 million.

"Compared to the prior three quarters, our fourth quarter results indicate that the measures we are taking to control our costs are working," said David Delaney, chief financial officer for the Hawai'i operations of Kaiser Foundation Health Plan. "We have seen positive results sooner than expected."

During the past two years Kaiser has cut 140 positions. The state's largest health maintenance organization also said it may have stemmed a loss of membership with the number of members ending the year at 222,000.

"We're really encouraged about that," said spokeswoman Jan Kagehiro.

Kaiser reported operating expenses declined to $213.2 million from $217.3 million a year earlier, while operating revenue increased during the quarter to $215 million. That was up from $210.3 million a year earlier.

For the year Kaiser reported a profit of $1.5 million on operating revenue of $864.2 million.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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