Highmark Health's insurance revenue in the first quarter buoyed the integrated health system amid steep investment losses, stagnant patient revenue and rising labor and supply costs.
Pittsburgh-based Highmark reported an operating income of $100 million on $6.4 billion in revenue in the quarter ended March 31. It recorded a net loss of $150 million on the quarter as its equity portfolio value declined by $200 million.
Highmark Health Plans' gains in its commercial and government business yielded a $150 million operating income through the first three months of the year. The 14-hospital Allegheny Health Network recorded a $106 million operating loss as total discharges and observation cases dropped 2.1% year over year and salary and benefit expenses jumped 13%. Those trends mirror first-quarter financial results for many health systems across the country.
Shifting more care from inpatient to outpatient settings is the right thing to do for the patient, said Saurabh Tripathi, chief financial officer and treasurer of Highmark Health.
"It does put pressure on Allegheny Health Network because reimbursement rates are different in outpatient than in inpatient," he said in an interview. "This is where being a blended health organization helps. We can find ways to incentivize our physicians (through value-based reimbursement) to perform more outpatient surgeries."
While inpatient volumes flattened or declined year over year, outpatient registrations excluding vaccination appointments surged 14% and physician visits rose 4%, executives said.
"A big focus of ours has been on improving access on the outpatient side. We've seen a pretty big and quicker (then expected) pivot," said James Rohrbaugh, chief financial officer and treasurer of Allegheny Health Network. "We have a unique opportunity and the right processes and reimbursement in place to successfully make that shift."
Highmark's dental insurance subsidiary, United Concordia Dental, had an operating income of $35 million in the first quarter while its stop-loss business, HM Insurance Group, reported an $18 million operating income.
As for Highmark's first-quarter investment losses, executives expect to recoup those in the latter half of the year. Stock market volatility does not impact its capital expenditure budgeting, Tripathi said, noting the company had $12 billion in cash and investments as of March 31.
"Operating gain is the key indicator because that determines our cash flow. That is the number we watch when determining our capital investment," he said.
