UPMC facilities are preparing to meet the “pent-up demand” among Highmark-insured patients who now can choose to go to UPMC doctors and hospitals, particularly when it comes to specialty care, UPMC’s chief financial officer said Tuesday.
“We’re seeing (patient) volume increases,” said Robert DeMichiei, CFO of UPMC, a nonprofit health system based in Downtown Pittsburgh’s U.S. Steel Tower that, like its rival Highmark, controls both provider and insurer arms. “We have plans with physicians to accommodate that demand.”
More than 1 million people with Highmark insurance plans across Western Pennsylvania stand to benefit from the 10-year private contract struck between UPMC and Highmark in late June and can now get care from UPMC at in-network rates. The deal also ensures that everyone will have access to emergency care.
More than 300,000 others on Highmark’s narrow-network plans, specifically Community Blue, remain shut out of most UPMC facilities or risk paying steep out-of-pocket costs. UPMC health plans similarly exclude most of Highmark’s Allegheny Health Network facilities.
DeMichiei and fellow UPMC executives said the celebrated agreement between the nonprofit health giants does not change UPMC’s strategy to continue to grow and meet specific health needs in communities across the state.
Western Pennsylvania’s health care field remains as competitive as ever, but, by putting years of feuding and litigation behind them, Highmark and UPMC officials now have more of a cooperative and mutually respectful relationship, DeMichiei said.
Meanwhile, Highmark executives expressed optimism last week that the UPMC deal would encourage more people to choose Highmark health plans.
UPMC’s efforts to better serve patients span everything from increasing the number of available telemedicine and video appointments, to offering more convenient services at outpatient clinics in suburban communities outside the city of Pittsburgh.
UPMC is on track to spend more than $1 billion this year on capital projects and related investments, DeMichiei said.
The new UPMC Memorial Hospital in York County opened earlier this month. Construction broke ground in March on a $400 million vision and rehabilitation hospital expansion at UPMC Mercy in Pittsburgh’s Uptown neighborhood.
By November 2020, officials are planning to open an ambulatory outpatient center at a former Toys ’R Us store in the South Hills amid stalled efforts to build a small hospital there, according to Leslie Davis, senior vice president of hospital systems for UPMC.
UPMC’s total operating revenue reached $10.19 billion through June, up from $9.25 billion the same time last year and $7.25 billion at the same time in 2017, unaudited statements provided by UPMC show.
Operating income, however, fell to $93 million — a 46% drop from the $176 million reported at the same time in 2018.
“We aspire to certainly do better,” DeMichiei said.
He attributed the decline in operating income to three primary reasons: investment losses related to pensions totaling about $22 million; increased spending of about $20 million on a new state-contracted long-term health program and its startup costs; and about $40 million in regional investments primarily focused on acquiring doctors and physician practices in Central Pennsylvania.
He said “some of those headwinds” such as pension costs and investments should not be ongoing problems.
Like Highmark Health, UPMC has bolstered its bottom line so far this year with strong investment gains.
Net income for UPMC for the first six months of 2019 amounted to $372 million — buoyed by a $279 million boost from its investment portfolio, according to statements filed with state regulators.
UPMC’s insurance membership grew by 3%, to more than 3.5 million subscribers.
After logging significant gains in the private Medicare market last year, UPMC seeks to increase its membership on commercial plans, which represents its smallest group but is growing, DeMichiei said.
Admissions and observations fell by 2% compared to the prior year, which has been a trend across the health care industry as patients get more access to primary and preventative care or outpatient clinics, DeMichiei said.
Through June 30, UPMC spent $506 million on capital and business investments “as it continues to make significant advancement in facilities, equipment, technology, education and operational strategies to enhance patient care in more communities in and beyond Western Pennsylvania,” officials said in a news release.
The planning stages continue for two other major hospital expansions at UPMC Presbyterian in Oakland and UPMC Shadyside — part of $2 billion in Pittsburgh hospital investments announced in 2017.
UPMC spans more than 40 hospitals, 600 doctors’ and outpatient offices and more than 85,000 employees, making it the state’s largest employer outside of government.