HealthPartners saw income grow amid COVID-19 in 2020

COVID-19 cut patient-care revenue but drove a rebound in income from insurance coverage last year at Bloomington-based HealthPartners, with the crosscurrents netting out to stronger earnings overall.

Clinics operated by the Bloomington-based nonprofit group saw a significant revenue decline last year as well as losses stemming from "the government shut down of our medical and clinic operations due to COVID-19," according to a regulatory filing. Hospitals and clinics were subject to a government order designed to preserve resources last spring for an expected surge in COVID-19 patients.

Yet the shutdown also meant the nonprofit group's HMO had to pay fewer claims than expected for medical expenses.

The federal CARES Act, which provided financial grants to help health systems deal with the economic consequences of the pandemic, provided $129.8 million in funding last year at HealthPartners. The health system also cut expenses by lowering salaries and closing clinics.

"Our 2020 financial performance was largely impacted by many one-time items and unexpected changes to patterns of care as a result of the COVID-19 pandemic," the health system said in a statement. "Without the grant funding and even with flexing of staff due to lower volumes, the health care operations would have posted a loss for 2020."

HealthPartners operates one of the state's largest health insurance companies and runs eight hospitals, including Regions Hospital in St. Paul and Methodist Hospital in St. Louis Park. With more than 26,000 employees, the nonprofit includes dozens of clinics through divisions called HealthPartners Medical Group and Park Nicollet Health Services.

In 2020, HealthPartners saw revenue of $7.03 billion and expenses of about $6.94 billion, resulting in operating income of $96 million, according to a financial statement disclosed last month to bondholders. Back in 2019, expenses exceeded revenue as the nonprofit group posted an operating loss of about $38 million.

After factoring investments in both years, net income jumped from $181.9 million in 2019 to $266.6 million last year, an increase of 47%.

As a group, health insurers in Minnesota fared well financially during the pandemic, although reduced medical expenses weren't the only factor. HealthPartners, like other carriers in Minnesota, benefited from a financial settlement with the federal government related to losses during early years of the federal Affordable Care Act.

Overall medical expenses for health insurers were lower last year, even though they faced new costs for medical services used by pandemic patients. HealthPartners invested in lab equipment that helped the health system process some 400,000 diagnostic tests for COVID-19, said Penny Cermak, the chief financial officer, during the nonprofit group's annual meeting in April.

Operating income last year was 1.4% of revenue, Cermak said, which is lower than the margin goal of between 2% and 3%.

"As a nonprofit organization, it's really important that we have positive financial results so that we can reinvest to improve the health of our members, patients and community," she said at the meeting, which was held online.

Membership and premiums were up for the nonprofit's HMO for people in the state Medicaid program, which covers those with lower incomes. Across the country, Medicaid programs during the pandemic stopped eligibility reviews that might otherwise have forced people off coverage.

HealthPartners has seen growing membership in its joint venture health plan with UnityPoint, a health system based in Iowa. The venture sells coverage in Iowa and Illinois for those in the federal Medicare program as well as large employer health plans.

In its primary health insurance business, however, HealthPartners during 2020 saw a second consecutive year of declining enrollment in employer health plans.

"The commercial employer group ... is down from 2018-2020 as a result of marketplace dynamics that include an overall shrinkage in the employer group market, compounded by the decline in the overall number of employees due to the economic downturn created by the pandemic," officials said in a statement.

Compared with health insurers, the pandemic has created more financial challenges for hospitals and clinics. Minneapolis-based Fairview Health Services reported last month that its financial losses grew significantly during 2020.

The state's largest nonprofit group, Mayo Clinic, saw net income grow to $2.47 billion last year due in large part to investment income. But operating income from providing patient care at Mayo was down compared with 2019, although the results were much better than clinic officials expected early in the pandemic.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck