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Partners earnings rose more than 33 percent in 2012

Driven by higher investment income, Partners HealthCare’s earnings climbed 33.5 percent to $352.3 million for 2012, up from $263.8 million in the prior fiscal year, the largest health care organization in Massachusetts reported Friday.

Partners HealthCare System Inc. posted a financial gain of $33.4 million in the fourth quarter, which ended Sept. 30, reversing a loss of $122.1 million a year earlier, when its investments did not do well.

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The quarterly gain came because the $35.8 million in income generated by Boston-based Partners’ investments more than offset a $2.4 million operating deficit. The operating loss reflected a one-time $42 million charge to pay a state assessment levied on Partners as part of health care cost-containment legislation.

The state assessed a total of $60 million in taxes on Partners, Boston Children’s Hospital, and Beth Israel Deaconess Medical Center to help fund programs under the new law.

Partners’ operating margin (the excess of operating revenue over expenses) narrowed to 2.1 percent in 2012, from 2.7 percent in 2011.

As a nonprofit, Partners tries to keep its operating margin in the range of 2 to 4 percent to support research and teaching at its hospitals, which include Massachusetts General and Brigham and Women’s, both in Boston.

“The operating performance was relatively consistent, and the investment performance was stronger in 2012 than 2011,” said chief financial officer, Peter K. Markell.

Markell said Partners continues to restructure and invest in things like an improved clinical records system to better coordinate patient care. Expenses from those investments are being offset by holding down costs as Partners’ hospitals take on more risk in their contracts with health insurers, he said. Markell said operating margins are expected to remain within the target range, despite the changes.

Revenue increased 6 percent to $9 billion in 2012, led by an 8 percent rise in patient service revenue to $6.8 billion.

Expenses, however, went up 7 percent to $8.8 billion, including a one-time charge of $114 million to finance the new clinical information system.

The organization absorbed a $986 million shortfall in 2012 in reimbursements for Medicare, Medicaid, and other government payer programs that serve low-income and older patients. Such programs represent about 40 percent of Partners’ patient service revenue.

Markell said Partners executives are monitoring the budget and deficit negotiations in Washington. He said they are concerned about the effect of spending cuts on health care reimbursements, medical research funding, and philanthropic donations.

Robert Weisman can be reached at weisman@globe.com.
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