Cuts in spending help Kaiser boost surplus 25%

Kaiser Permanente, the 32-hospital California-based system that also operates its own health plan, reported a 25% increase in its net surplus during the second quarter of the year as it added new members and scaled back capital spending.

The Oakland-based group improved its operating margin slightly to 4.7% in the quarter, compared with 4.6% in the prior-year period.

In total, Kaiser reported a $1 billion surplus on $14 billion in revenue in the quarter, compared with an $800 million surplus on $13.3 billion in revenue in the year-ago period. The group has added 386,600 members in the first half of this year on top of the 9.1 million members it reported as of Dec. 31.

Kaiser also has been making investments in its technology and its facilities. For instance, in the second quarter, it completed work on two replacement hospitals that needed to be upgraded to meet California earthquake requirements. San Leandro (Calif.) Medical Center opened on June 3 and Oakland Medical Center opened on July 1.

Yet capital spending slowed to $614 million in the second quarter, down 20.2% from $769 million in the year-ago period. Kaiser did not break out other operating metrics in its earnings release.