Greater-than-expected use of health care services drove a jump in earnings last year across the hospitals and clinics run by HealthPartners, even as the Bloomington-based nonprofit saw less income from its health insurance business.
The net result was an increase of just over 50% in operating income, according to financial results released this week at the HealthPartners annual meeting.
COVID-19 costs were part of the story. Since the start of the pandemic, HealthPartners has paid $298 million in claims for pandemic-related patient treatments, testing and vaccination services, with 60% of the expense coming in 2021.
At the same time, patients who delayed non-COVID care earlier in the pandemic returned for treatment last year as hospitals and clinics worked to provide routine services without the disruptions seen in 2020, said Andrea Walsh, HealthPartners chief executive.
“In 2021, we saw our highest-ever claims costs, paying more than $3.6 billion for members’ care,” Walsh said in an interview.
“We saw more patients in the hospital who were sicker and needed to stay in the hospital longer. We saw people who had held back from getting care and then came into our clinics and hospitals needing care for illness and injuries well beyond COVID.”
HealthPartners is one of Minnesota’s largest health insurers while running eight hospitals, including Regions Hospital in St. Paul and Methodist Hospital in St. Louis Park. The nonprofit employs more than 26,000 people with operations that span dozens of clinics in HealthPartners Medical Group and Park Nicollet Health Services.
Among Minnesota’s largest health care nonprofits, HealthPartners is unique for having roughly a 50-50 split in revenue between its health insurance and health care operations. Other nonprofits like Mayo Clinic or Blue Cross and Blue Shield of Minnesota primarily see revenue from providing either care or coverage.
In 2021, HealthPartners paid $7.6 billion in expenses from revenue of $7.75 billion, leaving operating income of more than $150 million — a 56% increase over operating income of $96 million in 2020.
It was the second year of improved results following an operating loss in 2019. Last year’s operating profit margin was about 2%, meaning HealthPartners saw 2 cents of operating income for every dollar of revenue.
Net income, which factors investments and other sources of non-operating income, grew by about 18%, from $266.6 million in 2020 to about $314 million last year.
“When we came into 2021, we had pent-up demand that came through the system, resulting in higher claims cost for the [health insurance] plan in 2021, but offset by higher volumes on the care side of the organization,” said Penny Cermak, the chief financial officer, in an interview.
During the annual meeting, which was held Tuesday online, Cermak said HealthPartners kept health insurance administrative expenses low, spending 92% of premium revenue on health care for subscribers.
“As a result of careful expense management and federal relief aid we ended the year with positive financial results,” Cermak said.
Hospitals and clinics across Minnesota saw a significant cut in revenue during 2020 as non-emergency services were delayed for weeks while the health care system prepared for a surge of pandemic patients. Health insurers during the time period saw profits grow, as routine care costs plummeted.
Minnesota hospitals and clinics were helped significantly by $1 billion in federal and state aid in 2020, according to a report this week from the Minnesota Hospital Association, and some of the emergency government funding in response to COVID-19 continued into 2021.
Hospitals say their financial results from 2020 raise questions about whether the industry needs better financing, particularly from the Medicare and Medicaid health insurance programs. The numbers from HealthPartners, however, are the latest indicator suggesting Minnesota health care providers saw a significant financial rebound last year as the sector got closer to pre-pandemic norms.
Rochester-based Mayo Clinic, which is the state’s largest employer, saw operating income jump by 66% last year to $1.2 billion.
Minneapolis-based Allina Health System last year posted $128.8 million in operating income, which was a significant improvement of the previous year’s operating loss of $36.2 million.
Walsh said she’s encouraged by recent membership in Medicare Advantage health plans sold by HealthPartners. The health system is continuing to invest in digital capabilities for providing more types of health care, including mental health services.
During 2021, HealthPartners provided more than 900,000 telehealth visits across its health system.
“One of the things that, clearly, we know has happened over the course of the last two years and as we move into the third year of the pandemic is the demand for mental health and the need for mental health services just continues to increase,” Walsh said. “So, as an organization, we are focused on how can we best meet this growing community need for access to mental health care.”