Healthcare Business News

UPMC sees fiscal 2014 volume gains, compromise with Highmark

By Beth Kutscher
Posted: August 21, 2014 - 3:15 pm ET

UPMC ended fiscal 2014 with a higher operating surplus as hospital admissions rose 8% and health plan membership increased 9%. The Pittsburgh-based system also booked operating revenue that was 12% higher than in its previous fiscal year, which ended June 30.

Just days before its fiscal year ended, UPMC also brokered a deal with insurance giant Highmark, which last year bought West Penn Allegheny Health System to create one of the country's largest integrated delivery networks, heating up competition in the greater Pittsburgh market in the process.

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In total, UPMC reported (PDF) a year-end operating surplus of $190 million on revenue of $11.4 billion, compared with a surplus of $132 million on revenue of $10.2 billion in fiscal 2013. Its operating margin increased to 1.7%, from 1.3%.

However, the 2013 results included UPMC's one-time cash donation to The Pittsburgh Promise, a charitable organization that helps the city's public high school students pursue higher education. Excluding that, UPMC's 2013 operating surplus would have been $187 million, for a 1.8% operating margin.

UPMC had wanted to let its contract with Highmark expire at the end of the year, but the insurer fought to keep UPMC in network. Under a June deal orchestrated by Gov. Tom Corbett, Highmark's patients will have access to UPMC's oncologists, behavioral-health and pediatric specialists, emergency departments and any doctors from whom they're currently seeking care for a particular condition.

Highmark members accounted for 19% of UPMC's revenue in 2014, down from 21% the previous fiscal year.

In its annual report, UPMC said as of Dec. 31, it had retained its 61% market share in Allegheny County, and had grown its market share in 10-county southwestern Pennsylvania to 42% from 41.1%. Its market share in 29-county western Pennsylvania also grew to 41.4% from 37.1%.

In the western part of the state in particular, admissions at its hospitals increased 8.3%, even though admissions were down 2.9% for all hospitals across the region.

The 2014 results include its 2013 acquisition of Altoona (Pa.) Regional Hospital, which contributed to the large year-over-year volume growth. Without Altoona, volume across the system would have declined 1.2%.

UPMC's own insurance division grew to 2.3 million members in fiscal 2014. Yet the group saw a decline in operating income after being squeezed by lower premiums, sequestration cuts and higher administrative expenses.

Follow Beth Kutscher on Twitter: @MHbkutscher

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