Pittsburgh's two major health systems reported greater profitability in their most recent earnings, despite increased competition and a bitter regional turf war.
UPMC health system, with 13 hospitals in Western Pennsylvania, reported an improved margin for the first six months of its fiscal 2015. Its operating margin increased to 3% for the six-month period ended Dec. 31, up from 2% in the same period the previous year.
Main rival West Penn Allegheny Health System also reported profit in the fourth quarter of 2014 as its financial performance continued to improve after its takeover by insurance giant Highmark. It posted operating income of $2.2 million on $453.7 million in revenue for the quarter, according to a financial statement filed with the Pennsylvania Insurance Department. The statement did not include a year-over-year comparison.
It had been operating in the red in previous quarters, but its losses have narrowed since its Highmark takeover. For full-year 2014, West Penn's operating loss was $13.3 million on $1.7 billion in revenue.
Competition in the Pittsburgh market heated up in 2013 after Highmark purchased West Penn Allegheny to form one of the largest integrated-delivery networks in the country. UPMC fought to allow its contract with Highmark to expire at the end of 2014, but opposition from the insurer and some state legislators ultimately led to a compromise that will preserve access to some services.
However, UPMC is becoming less dependent on revenue from Highmark patients. Its latest earnings report showed that Highmark accounted for 18% of its gross patient-service revenue in the first six months of the year, down from 20% in the prior-year period.