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UPMC reports strong year-end financials

Ben Schmitt
| Monday, Aug. 29, 2016, 8:57 p.m.

Health giant UPMC appears to be navigating the Affordable Care Act marketplace successfully while national insurers continue to flee for financial reasons.

UPMC Insurance Services Division has 3 million subscribers, the largest medical and behavioral health services insurer in Western Pennsylvania, UPMC Chief Financial Officer Robert DeMichiei told reporters at its corporate offices Monday after releasing 2016 fiscal year end statistics.

“There's really been explosive growth on the health plan side,” he said, adding the UPMC Health Plan grew by 10 percent over the past fiscal year which ended June 30.

Highmark, Aetna and UnitedHealthcare are among a group of large insurers who have reported major losses on the ACA market. UnitedHealthcare left Pennsylvania's marketplace this year.

Two weeks ago, Aetna announced it was pulling out of the market established by the Affordable Care Act in all but four states in 2017, citing a loss of more than $430 million in individual insurance products since 2014.

DeMichiei said UPMC initially took a measured and calculated approach to entering the ACA marketplace, which is now paying dividends.

“We did not jump in with low price points,” he said. “That is what I think happened to the national insurers and to many of the Blues across the country — the idea was to grab market share immediately. We did not do that, and that allowed us to get some clarity about the population and the right pricing.”

UPMC Health Plan's share of the Affordable Care Act marketplace grew from 18 percent at the end of the 2014-15 open enrollment period to 67 percent at the end of the 2015-16 enrollment period, spokesman Paul Wood said. The enrollment period ended Jan. 31.

During Monday's news briefing, DeMichiei reported that UPMC had $310 million in operating profit for fiscal 2016. The operating profit was down from $384 million the previous year. However, officials attributed the drop to a one-time $233 million gain in a June 2015 public offering from subsidiary Evolent Health Inc.

The Downtown-based health system said operating revenues grew to $13 billion for the year. Officials described the system's financial performance as strong, with capital expenditures and business investments totaling $428 million.

DeMichiei said UPMC's market share was 40 percent in 29 Western Pennsylvania counties, while it delivered 70 percent of all hospital charity care in the region.

“This is part of our mission and one we take on in a disproportionate way, and we do so gladly,” he said.

UPMC employs around 60,000 and did not offer buyouts to employees this past fiscal year as it did the previous year. The nonprofit remains Pennsylvania's largest nongovernmental employer.

As expected, UPMC continues its transition away from rival Highmark. Net patient revenue derived from Highmark decreased from 26 percent to 18 percent over the past fiscal year.

Most UPMC hospitals no longer accept most Highmark insurance, and UPMC Health Plan doesn't contract with most Allegheny Health Network hospitals.

There are still a few exceptions. A Pennsylvania Supreme Court decision issued in November required UPMC to include seniors in a group of “vulnerable” Highmark patients that the state is requiring UPMC to continue treating until 2019, when a consent decree governing relations between the nonprofits expires.

Thirty-four percent of UPMC's revenue came from Medicaid, 16 percent came from national payers and 13 percent came from Medical Assistance.

“The old days of having a dominant insurer and a dominant provider are gone, and what you have now is a competitive environment where the best system will win,” DeMichiei said. “We look to our financial results as a proxy for our progress.”

Ben Schmitt is a Tribune-Review staff writer. Reach him at 412-320-7991 or bschmitt@tribweb.com.

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