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Highmark Health says 2017 revenue was record-breaking

| Monday, March 19, 2018, 12:54 p.m.
Highmark Health CEO David Holmberg, Downtown on Thursday, March 3, 2016.
Justin Merriman | Tribune Review
Highmark Health CEO David Holmberg, Downtown on Thursday, March 3, 2016.
The Highmark sign atop Fifth Avenue Place in Downtown Pittsburgh.
Keith Hodan | Tribune-Review
The Highmark sign atop Fifth Avenue Place in Downtown Pittsburgh.
Highmark Health CEO David Holmberg
Highmark Health
Highmark Health CEO David Holmberg

Highmark Health said Monday it achieved $18.26 billion in record revenue for its 2017 fiscal year, an increase of $616 million from last year's figure.

The amount includes $1.1 billion in revenue over expenses, an improvement of $1 billion from 2016, the company said.

Helping to make its $1 billion-plus year possible was the performance of its Affordable Care Act businesses. Highmark, the parent of Highmark Inc. and Allegheny Health Network, said its ACA businesses produced income for the first time last year, a turnaround from previous years when it lost millions.

Highmark lost about $148 million on the plans in calendar year 2016, bringing the insurer's total losses in the ACA marketplace to more than $900 million since the markets launched. Highmark set some of the lowest rates in the country when the markets launched and then found the people who bought the plans were sicker than the insurer expected.

Midway through the 2017 fiscal year, Highmark officials started treating ACA members like Medicaid managed care plans. Patients were encouraged to use health coaches and primary care doctors to encourage them to follow treatment plans. This, in turn, reduced visits to emergency rooms and lowered treatment costs.

Revenue for Highmark Health was driven by increased income in two key businesses, officials said: its commercial business and its hospital system.

“We continue to expand,” said David Holmberg, president and CEO of Highmark Health. “We're strong and we're stable.”

Highmark Health had net assets of $6.5 billion, up 25 percent from the previous year. Its cash and investments were $7.9 billion.

“Thanks to our steady progress and continued momentum, we delivered our strongest financial performance and capital level of $6.5 billion, confirming that our strategy is working and that consumers are benefitting from increased access to high-quality, community-based, affordable health care,” Holmberg said.

Karen Hanlon, Highmark Health executive vice president and chief financial officer, characterized 2017 as a “watershed” year.

The health plan reported an operating gain of $750 million, up from $508 million in 2016. The company said much of the increase was because of “significant” progress in its government business, which was up $411 million from the prior year. Its commercial business also had gains of $100 million for fiscal 2017.

“We were able to grow volume organically and not through acquisition,” she said.

Highmark Health was formed in 2013 as the parent company to insurer Highmark Inc. and the hospital network, which it created the same year. The company's net gain for the first six months of 2017 was $535 million.

The company said membership in its health plan remains steady with a 94 percent retention rate in its commercial business, totaling 4.6 million members in its core markets of Pennsylvania, West Virginia and Delaware. Its commercial retention rate in Western Pennsylvania is 96 percent.

Key investments in Allegheny Health Network last year totaled more than $218 million. AHN had receipts of $3.1 billion, up 8 percent from the prior year's total. This was attributed to stable hospital volume, high patient acuity, greater operational efficiencies and more effective business and clinical processes. Physician office visits increased by 4 percent, and ambulatory surgery center volume was up 10 percent. Hospital in-patient and out-patient volumes were flat.

Highmark said its diversified businesses, which include its United Concordia dental insurance business and its vision and stop loss companies, had operating revenue of $103 million, down $60 million from the previous year.

Suzanne Elliott is a Tribune-Review staff writer. She can be reached at selliott@tribweb.com, 412-871-2346 or via Twitter @41Suzanne.

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