Geisinger reports net income increase despite issues with ACA health plan

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Dive Brief:

  • In a new financial report, Geisinger Health System reported a gain of nearly $200 million in net income to $324.9 million for the first half of fiscal year 2018 compared to the previous year, for an excess margin of 9%.
  • Operating income for the first six months was up from $51.9 million a year ago to $61.2 million in the current fiscal year and net revenue increased 8.1% to $3.3 billion. However, Geisinger’s operating margin dropped from 3% for the first three months of the fiscal year to 1.8% through half the year.
  • One area of concern for the integrated healthcare system was its Affordable Care Act (ACA) health plan. Geisinger Health Plan (GHP) struggled after the company didn’t get $11 million in cost-sharing reduction (CSR) payments following President Donald Trump’s decision to stop payments in October.

Dive Insight:

Geisinger’s net revenue growth is connected to an increase in net patient service revenue after the provision for bad debts of nearly 5% and an increase in premium revenue of 11%.

“Net patient service revenue benefited from the realization of growth plans centered on market share growth and the opportunistic capture of high-acuity, clinical service volumes. Premium revenue benefited primarily from rate increases,” Geisinger said in the report.

ACA marketplace volatility, namely the end of CSR payments, as well as higher utilization affected GHP. The company believes the higher utilization is connected to GHP members concerned they would lose coverage if Congress repealed the ACA. Despite Congress’ and the president’s threats and a few close votes, the repeal didn’t happen. But before that effort stalled, Geisinger said many members got healthcare services just in case.

“Similarly, provider tiering in benefit plan changes for self-insured employees were announced in the fall of 2017. These benefit changes caused certain employees to accelerate medical services through providers that fall under higher out-of-pocket tiers beginning Jan. 1, 2018. These one-time impacts, while negatively affecting second-quarter results, are expected to improve operating profits beginning in the third fiscal quarter,” Geisinger said in the report.

Geisinger expects to resolve the CSR non-payment issue this year after raising the average premium rate by 31% to help offset the loss of payments. GHP also gained more than 20,000 members in its exchange plans, a 39% increase, for 2018, which should help offset losses.

GHP had 559,643 members in its health plans through the first half, which was a 0.4% increase compared to a year ago.

Concerning utilization, Geisinger had an increase of 3.5% in discharges and 2.6% in discharges and observations/23-hour stays compared to a year ago. “This growth was attributable to success in expanding clinical programs. Based solely upon hospitals controlled for two years or more, Geisinger experienced a 2.9% increase in discharges when compared to the year-earlier period,” the report states.

However, percent of occupancy based on physically available beds dipped from 60.2% to 59.9%.

Meanwhile, outpatient visits were on the rise. Outpatient emergency room visits increased from nearly 174,000 the previous year to almost 181,000 in fiscal 2018. Clinic outpatient visits increased from 1.65 million to 1.77 million.

Geisinger is the latest nonprofit to offer updates about finances. Over the past week, other major nonprofits have released financial information, including:

All had positive notes in their reports. Cleveland Clinic and Mayo Clinic said operating income and revenue bounced back in 2017 after rough numbers in the previous year. UPMC said its clinical and insurance sides had strong performances as net income hit $1.3 billion. Profits for these companies have been scrutinized as critics question whether they are giving enough back to their communities as nonprofit organizations.

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