Highmark Health, the company formed to operate insurer Highmark and a Pittsburgh health system, reported an operating loss of $178 million last year as health plan enrollment stalled and the turnaround of the system continued.
The company's total loss was $83 million in 2014 compared with a net loss of $134 million in 2013.
Highmark's health plan enrollment remained largely flat and the insurance operations broke even in 2014 while a turnaround continued at Highmark's Allegheny Health Network, an eight-hospital health system that has hemorrhaged cash in recent years. Highmark acquired the system in 2013 in a deal for the then faltering West Penn Allegheny Health System. It has since added hospitals and other providers to the network, which it renamed as well.
Highmark Health's revenue increased roughly 6.1% to about $16.7 billion last year while expenses climbed nearly 6.4% to about $16.9 billion. The 2014 operating loss of $178 million was deeper than the prior year's loss on operations of $126.3 million.
David Holmberg, chief executive of Highmark Health, described the year as “solid but challenging,” during a conference call announcing the results.
The insurer Highmark lost membership in Western Pennsylvania but offset that decline with new enrollment under the Affordable Care Act, he said. The company's western Pennsylvania market is fiercely competitive and largely divided between Highmark Health and rival UPMC, which also operates a health plan and Pittsburgh-based health system. The health plan broke even last year after reporting operating income of $309 million in 2013.
Operating losses at the Allegheny Health Network declined to $37 million from $402 million. Holmberg said the system could have ended the year without a loss in 2014, but officials instead opted to spend more to invest in ambulatory expansion, he said. The system will seek to deliver more post-acute care to treat more patients outside of its hospitals, which are less convenient and most costly, he said.
He declined to say whether the Allegheny Health Network would finish 2015 with a profit. “We're pleased with what we've seen in 2015,” he said. The system may accelerate its adoption of electronic health records, which has so far been introduced in dozens of physician offices and a medical pavilion.
In March, Highmark Health asked the Pennsylvania Department of Insurance to approve a proposed $175 million cash infusion to Allegheny Health Network from Highmark. In its request, Highmark Health said the infusion was necessary to make needed capital investments and maintain a sufficient cash cushion. Patient demand has been lower than anticipated as demand has fallen across the region, the application said. The state insurance department has not ruled on the request.
Highmark Health's newly created information technology company HM Health Solutions, launched last year, ended 2014 with income of $4 million. Highmark Health's vision and dental businesses ended the year profitably with operating income of $243 million.
The year's results did not include $155 million of 2014 revenue that is expected from the CMS under premium stabilization programs under the ACA, said Karen Hanlon, chief financial officer of Highmark Health. The revenue is expected before the end of the current fiscal year.
Highmark Health's assets declined to $5.4 billion from $5.8 billion, which Hanlon said was largely the result of increased pension liabilities.
