UPMC Reports $17B Revenue Despite Pandemic

Nov. 26--The covid-19 pandemic does not appear to be threatening the financial strength nor slowing the growth of UPMC, according to the health giant's executives and newly released documents.

Buoyed by federal aid and insurance revenue gains, UPMC's total revenue from January through October reached nearly $17 billion -- 11% higher than the same time last year, the nonprofit system's unaudited financial report shows. Operating income -- earnings after deducting operating expenses -- totaled $227 million, up by more than 200% from the $73 million reported this time last year.

UPMC Chief Financial Officer Ed Karlovich said that after plunging this past spring, hospital volumes and clinical revenues are "steadily increasing back to pre-pandemic levels."

"We are seeing our patients continue to seek UPMC care for both urgent care and routine care that they may have delayed," Karlovich said.

Executives anticipate continued strong financial performance even with the recent climb in covid-19 cases and hospitalizations in Western Pennsylvania and statewide.

Karlovich deferred to clinical experts questions regarding potential staff shortages or the need to postpone elective procedures again, as many health experts and hospital systems have been flagging such concerns around the country.

"We do have robust plans in place to expand capacity if needed," UPMC spokesman Paul Wood said. "We are a 40-hospital system, with numerous beds, we can transfer patients across our entire system, and we can share staff across our entire system as well."

Hospital revenue down, insurance up

UPMC has been able to withstand drops on hospital revenue with help from related revenue gains in its insurance arm; when hospital procedures slow down, insurance claims and payouts go down, too.

Six months ago, UPMC had estimated losing out on an estimated $150 million in revenue during the last two weeks in March because of the pandemic-spurred lockdown on non-urgent procedures.

In the first nine months of 2020, outpatient revenue fell by 4%, physician revenue dropped by 6% and admissions and observations are down by 11% compared to the same time last year, UPMC's data show. Clinical revenue was down $163 million in the first nine months of this year compared to 2019.

But over the same period, a combination of savings on claims and growth in membership led to an increase of $317 million from insurance plans through October compared to the first nine months of last year.

Membership increased by 300,000 more people than this time last year, up to 3.9 million.

The insurance side saw gains in Community Health Choices participation and Medicaid "as a result of the governor maintaining people on the rolls during this very difficult and challenging time," Karlovich said.

He said that Affordable Care Act coverage and sign-ups will continue as legal uncertainty lingers surrounding the Trump administration's attempt to get the Supreme Court to repeal the health care law.

"As far as the ACA goes ... we are all watching that very closely. There's been lots of pushes and pulls. We don't know where that's going to go in the future," Karlovich said.

The financial results "clearly show the benefits of its successful integrated delivery and finance system strategy" -- which refers to operating both insurer and provider systems -- as well as effective clinical leadership, UPMC officials said in a statement discussing the third-quarter figures.

Rival nonprofit health system Highmark also controls both insurer and provider arms. Highmark is expected to release its third-quarter financial figures next week.

Federal relief provides boost

The Downtown Pittsburgh-headquartered health system's operating revenue through October would have totaled closer to $16.6 billion, or $318 million less, had the federal government not provided UPMC relief in the form of aid to be reported as revenue.

UPMC received an additional $840 million in federal assistance in the form of advance payments that do not have to be repaid for more than two years.

The system also took on more than $2 billion in new debt and tapped into credit lines -- "part of our plan to make sure we had sufficient working capital given the uncertainty of the pandemic," Karlovich said.

"While covid-19 did adversely impact UPMC's operating results, UPMC does not believe that the effects are significant enough or of a long enough duration to indicate impairment," states the third-quarter financial report.

UPMC's net assets now approach $8.6 billion, up from $8.3 billion this time last year.

When asked whether UPMC might need more outside relief or be burdened by further negative pandemic-related impacts, Karlovich said it is "too soon to tell at this point whether the government will provide any more relief funding."

UPMC announced this week the opening of a $12 million UPMC Children's Harrisburg inpatient wing at UPMC Pinnacle.

Among other recent projects: a new UPMC Children's Specialty Care Center in Washington; the construction of the UPMC Vision & Rehab Center in Uptown Pittsburgh; and the expansion of the UPMC East Emergency Department in Monroeville.

In November, a Magee-Womens Specialty Services Center will at UPMC Mario Lemieux Sports Complex along Interstate 79 in Cranberry, equipping it with specialized doctors and new equipment for early cancer diagnosis, breast cancer surgery, midwifery and obstetrics and gynecology care. A UPMC Children's Express Care also opened at the Lemieux Center to provide after-hours care of minor injuries and illnesses by board-certified pediatricians on nights and weekends, as a cheaper and more specialized alternative to urgent care.

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, [email protected] or via Twitter .

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