UPMC growth adds expenses, profit falls

| Thursday, Feb. 2, 2012

UPMC treated more patients and signed up more insurance customers in the last three months of 2011, which pushed revenue for the nonprofit up 15 percent.

But growth came at a cost, as Western Pennsylvania's dominant hospital system on Wednesday reported lower operating income for the quarter, because of rising expenses.

"More and more, patients, physicians and businesses are increasingly choosing UPMC," said Robert DeMichiei, UPMC's chief financial officer, adding that UPMC is growing even as the overall market for medical procedures is shrinking.

The system of 19 hospitals and more than 3,000 physicians said income from operations fell 42 percent to $64.7 million, compared to $112.4 million in the same period the previous year. Revenue was $2.35 billion during the October-December quarter, up 15 percent from $2.05 billion in the same quarter a year ago.

UPMC's operating expenses were $2.29 billion in the three-month period, up 18 percent from the year before, as the system spent more on salaries and benefits, and on supplies and services, financial records showed.

UPMC is ramping up hiring for UPMC East, its new $240 million hospital in Monroeville that's slated to open in July. And the system pledged to create 1,900 new jobs between July 2011 and June this year.

One-time charges included setting aside $60.7 million for bad debt, which was slightly higher than the year before because of a change in accounting rules.

DeMichiei said UPMC spent money on several new programs at the end of the year, such as a telemedicine platform, a regional health information exchange and developing new ways of tracking quality. Those programs are part of $44 million in new programs UPMC plans to implement by the end of June, he said.

Net income for the October-December period was $143.7 million, down 29 percent from the year before as investment income during the quarter came in slightly lower.

UPMC said patients are increasingly choosing UPMC for both inpatient and outpatient procedures. During the second half of last year, the number of hospital admissions and observations cases at UPMC jumped 13 percent to 125,370. The average revenue for outpatient procedures in the second half was $7.2 million per workday, up from $5.5 million the year before.

And UPMC Health Plan, the system's health insurance unit, started January with 1.79 million members, up 14.5 percent from January 2011 when the insurance carrier had 1.56 million members.

UPMC Health Plan offers health insurance through employers as well as coverage for behavioral health services, worker's compensation and government programs such as Medicare and Medicaid.

For employer-sponsored health insurance, UPMC Health Plan said its membership in January was 373,621, up 11 percent over January 2011.

Additional Information:

UPMC to offer individual health insurance

UPMC Health Plan will begin offering individual health insurance products next month, its first foray into the individual market.

Starting March 1, UPMC Individual Advantage will provide eight plans, each with pharmacy and maternity coverage and access to more than 90 hospitals and more than 9,800 doctors.

UPMC's individual plans are medically underwritten, meaning rates are set based on age and health, and coverage can be denied based on chronic medical conditions.

While plans will offer a variety of rates and deductibles, UPMC Health Plan said coverage could cost as low as $75 a month.

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