UPMC's top line is feeling the benefits from the truce it struck with rival Highmark Health last year, which ended a bitter contract dispute that threatened to saddle Highmark insurance customers who visit UPMC hospitals and physicians with higher costs.
Pittsburgh-based UPMC said now that a new in-network agreement is in place, Highmark plan members are flocking to UPMC facilities and helping to drive revenue higher. Highmark members seeking inpatient and outpatient care grew 30% and 26%, respectively, in 2019 over the year before, UPMC said Friday.
The two integrated health systems reached a 10-year agreement in June 2019 to allow Highmark Medicare Advantage and commercial members to continue receiving care at UPMC in western Pennsylvania. It came after Attorney General Josh Shapiro sued UPMC in an attempt to keep its network open, and UPMC countersued to block Shapiro's efforts. The truce resolved the litigation.
The growth in Highmark members seeking care at UPMC drove higher physician revenue and outpatient revenue. Average physician service revenue per weekday grew about 7% to $7.1 million, while average outpatient revenue per workday grew about 6% to $14.9 million. Inpatient admissions and observation visits decreased 1.3%, however, to 360,300 visits for the year.
Lower inpatient volume didn't seem to hurt UPMC. In total, operating revenue in the health services segment increased 4.8% to $12.4 billion. Operating income from health services was $14 million, compared with a loss of $46 million in 2018.
Meanwhile, UPMC's health insurance segment, UPMC Health Plan, grew operating revenue 16.9% to $10.5 billion in 2019. The organization attributed the growth to higher membership, which totaled 3.6 million at the end of the year, an increase of 5.3%. UPMC said that by Jan. 1, 2020, membership had grown to 3.8 million.
But UPMC said it experienced start-up losses on a new Pennsylvania managed care contract for dually eligible patients, higher claims and higher value-based payments, which offset the increased premium revenue from the enrollment gains. Its operating income in the insurance business fell to $13 million in 2019 from $140 million as a result.
Across the entire enterprise, UPMC's operating revenue totaled $20.6 billion for the full year 2019, up 9.8% over 2018. Its operating expenses grew 10.2% to match its revenue at $20.6 billion. Operating income fell 71.3% to $27 million. UPMC said that's because it reinvested its income to advance patient care. It spent $1.2 billion on community benefits during the year and $971 million on capital expenditures and business investments in the year to enhance facilities and technology.
The health system reported net income of $420 million compared with a loss of $290 million the year before.
