Northwell Health's finances steady despite insurance division losses

Great Neck, N.Y.-based Northwell Health's operating income increased to $66.5 million in the first six months of 2016, up from $52.7 million in the same period of 2015.

The system saw a 14.6 percent year-over-year increase in operating revenue, which grew to $4.8 billion in the first six months of this year. The financial boost was attributable, in part, to increased patient volume, continued revenue cycle initiatives and the acquisition of Riverhead, N.Y.-based Peconic Bay Medical Center. Northwell said $76.2 million, or 1.8 percent, of the increase was related to the acquisition of Peconic.

Northwell said operating expenses increased at nearly the same rate as revenue, climbing 14.4 percent year over year. 

Although there was positive growth on the provider side, Northwell's insurance division continued to struggle in the first half of 2016.

The system launched its commercial health plan, CareConnect, in 2014. In the first six months of this year, CareConnect net premium revenue increased to $174.6 million, up from $54.1 million in the same period of 2015. However, the health plan ended this first half of 2016 with a net loss of $46 million after its estimated Affordable Care Act risk adjustment program liability of $53.2 million and other costs were factored in. Northwell anticipates a full-year loss of about $110 million for CareConnect as a result of the current risk adjustment methodologies.

"Northwell is continuing to seek regulatory solutions to the risk adjustment program while taking actions intended to improve CareConnect's financial results," the system said in a discussion of its financial and operating results. "As a result of the financial impact of the flawed risk adjustment program, management would reconsider continued participation in the insurance market, or specific insurance products, if the long term financial sustainability of the strategy cannot be reasonably assured."

Northwell ended the first six months of this year with an operating margin of 1.4 percent, up slightly from an operating margin of 1.3 percent for the six months that ended June 30, 2015.

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