UPMC-Highmark divide is growing

Nov. 05--UPMC continues to wean itself from Highmark, with only 11 percent of its patient revenue coming from the Pittsburgh region's largest insurer during the recently concluded July-October period, compared with 17 percent for the same quarter a year ago.

Patient revenue from UPMC Insurance Services, meanwhile, represented 12 percent of the total during those three months.

The end of a long-standing contractual arrangement between the two health giants may be the biggest, most obvious reason for the change but UPMC CFO Robert DeMichiei says national trends have played an important role, too.

Those trends include an expanded Medicaid program, the emergence of federal marketplace plans and swelling Medicare ranks as the general population ages. Patients on these government-run programs represent "the patient of the future," said Mr. DeMichiei during a quarterly financial briefing Wednesday at UPMC corporate headquarters in the U.S. Steel Tower, Downtown.

Medicare and Medicaid together represented 61 percent of UPMC's recorded patient revenue for the first quarter of the 2016 fiscal year ending next June, slightly more than a year ago. But caring for these populations has added financial pressure, he said, as reimbursement rates have not kept pace.

As a result, he said, "We have to do more, we will be paid less and we have to provide quality care."

For the first quarter of fiscal 2016, UPMC saw its operating income drop from $93 million last year to $72 million, although the lower figure does fall in line with results from previous years.

The region's largest health provider also saw its operating margin go from 3.2 percent in 2014 to 2.3 percent this year while operating revenue climbed to $3.1 billion from $2.9 billion a year ago. Patient volumes were down 3 to 4 percent for the quarter, mirroring a regionwide trend of declining patient admissions.

Steve Twedt: [email protected] or 412-263-1963.

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