The Pittsburgh-based UPMC health system saw its insurance revenue rise 6% to $1.3 billion in the quarter ended Sept. 30 compared with the same period the previous year. Insurance revenue represented a little less than half of UPMC's $2.9 billion in total revenue for the first quarter of its fiscal 2015. The division also recorded an $11 million operating surplus, almost four times the surplus from last year.
Its health insurance arm apparently is serving as a source of stability and growth for UPMC during its bitter battle with in-town competitor Highmark.
UPMC's insurance services division includes UPMC Health Plan, which offers various commercial and Medicare Advantage plans. UPMC boosted its total insurance membership by 5% in the quarter ended Sept. 30 compared with the same period a year ago, giving it a total of 2.35 million customers.
Despite the increase, that's still less than half of Highmark's 5.2 million members. Highmark, also based in Pittsburgh, is the largest health insurer in the region. It's also building a rival provider system called Allegheny Health Network, formerly known as West Penn Allegheny Health System, to compete with UPMC.
Highmark and UPMC have long been at odds. The two are preparing for a transition plan that goes into effect Jan. 1, an attempt by the state to quell concerns for the many Highmark members who routinely visit UPMC's providers. The deal outlines which UPMC hospitals and doctors will be in-network for Highmark enrollees.
UPMC's health plans were a bright spot in the system's first quarter of fiscal 2015, and its medical-loss ratio was 90.7%, down from 91.6% last year.
In addition to UPMC's regular health-plan offerings and a workers' compensation product is Evolent Health, a joint venture between UPMC Health Plan, The Advisory Board Co. and private-equity firm TPG Growth. Evolent works with payers and providers to create value-based reimbursement models. In the first quarter, the company had more than 117,000 members, a 136% increase from the same period last year.
UPMC's total operating surplus in the quarter, including its provider and insurance sides, equaled $89 million, down from $175 million last year. However, last year's surplus factored in a one-time benefit from the system's acquisition of Altoona (Pa.) Regional Hospital, now known as UPMC Altoona. UPMC's total surplus, which includes investment income, was $49 million—down significantly from the $294 million recorded in the year-ago period. The system tallied $11 million in investment losses, compared to $152 million in gains last year.
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