The growth story continues at HealthPartners as the Bloomington-based health insurer and operator of hospitals and clinics hit the $7 billion mark in annual revenue last year and added its seventh hospital.
For 2018, net income at HealthPartners declined compared with the previous year due to a plummeting stock market in the fourth quarter that torpedoed investment returns.
But financial results from the nonprofit group’s health insurance business improved significantly. Losses dried up in the business managing care for Medicaid enrollees and income roughly doubled in the market where individuals buy health insurance.
“It was better than what we had planned,” said Todd Hofheins, the HealthPartners chief financial officer, in an interview Wednesday after the group’s annual meeting in St. Paul. “We had good performance out of many of our operating areas.”
HealthPartners is one of the state’s largest nonprofit groups with 26,000 employees and operations that include Regions Hospital in St. Paul and Methodist Hospital in St. Louis Park. HealthPartners has sold health insurance and operated clinics for more than 50 years, but has emerged over the past decade as a bigger force in the state’s hospital market — a trend that continued last year through a merger with Hutchinson Health.
For 2018, HealthPartners took in just over $7 billion in revenue from the premiums it charges those who buy its health insurance coverage and the money it generates providing health care services. Beyond hospitals, HealthPartners operates 55 primary-care clinics, 22 urgent-care centers and 24 dental clinics.
After covering total expenses of about $6.9 billion and factoring investment returns, net income for 2018 came in at $146.5 million — down about 16% from net income of $175.5 million the previous year, when investments provided a large chunk of income. Stripping away the investments from both years, operating income grew to $153 million, compared with $64 million the previous year.
“From a net income perspective, it’s slightly below” the 2017 results, Hofheins said. “From an operating income [perspective], it’s slightly better.”
Hofheins downplayed the significance of the $7 billion in annual revenue last year, noting that many health care groups across the country are much larger. What’s unique about HealthPartners, he said, is the roughly even split in revenue between the insurance business and the health care business, which sells services to other health insurers.
Hofheins became CFO at HealthPartners after working on the West Coast, where prominent insurers like Kaiser Permanente that also run hospitals and clinics do so primarily for their own subscribers, he said.
For those with commercial health insurance at HealthPartners, medical costs grew in 2018 by 3%, which was the lowest rate of annual increase in five years, Hofheins said. The reduced trend “really helped on the insurance side from a margin perspective,” he said.
Minnesota’s nonprofit health insurers generally posted improved financial results for 2018 for the same reasons cited by HealthPartners, as the Medicaid business improved and profits grew in the individual health insurance market. In 2016, insurers posted big losses due to struggles in both markets.
The picture was more mixed last year among hospital and clinic operators. Operating income held steady between 2017 and 2018 at Rochester-based Mayo Clinic and Minneapolis-based Fairview Health Services, but declined 42% at Minneapolis-based Allina Health System.