UPMC profits, investment income drop in 1st half of the year

Hospitals across the country, including local health care giant UPMC, reported massive earnings in 2021, but those large profits appear to be slowing down significantly in 2022 thanks to increased operating costs and losses from investment activities.

UPMC reported $82 million in operating income — revenue minus operating expenses — for the first half of this year, which is down compared to the $605 million UPMC earned in the first half of 2021.

The drop in operating income was reported as UPMC, the largest health care provider in Western Pennsylvania, saw its operating revenue increase to $12.5 billion in the first half of the year from $12.2 billion in the same period a year ago.

Company officials said supply-chain issues and labor shortages have increased costs and eaten into revenue.

“Throughout 2022, the continued effects of covid-19, including the most recent surge, along with conditions in the labor and supply markets, has resulted in increasing costs for staffing and other operating expenses,” UPMC Executive Vice President and CFO Edward Karlovich said in a release.

UPMC also experienced a $866 million loss from investing and financial activities. This drop in investment income continues a trend that started at the beginning of this year, likely spurred by bearish stock market.

Last year, UPMC was making gains from its investments. In the first half of 2021, the health care giant made $531 million in investment income.

Karlovich said UPMC also has been strategically reinvesting in hospital expansions as a means to spur growth. In the first half of this year, UPMC spent $471 million on capital expenditures. He highlighted UPMC’s expansion into Central Pennsylvania, where the organization has invested $910 million over the past five years.

UPMC also is expanding in Pittsburgh. A $510 million expansion to UPMC Mercy in Uptown is under construction, and UPMC broke ground this year on a $1.5 billion hospital tower in Oakland.