Despite pandemic, UPMC rakes in record-high $23.1 billion in 2020 revenue

The coronavirus pandemic did not thwart UPMC from raking in a record-high $23.1 billion in 2020 operating revenue — nearly $2.5 billion more than the nonprofit health system generated in 2019 and $10 billion more than it did five years ago, data released Friday show.

UPMC Chief Financial Officer Ed Karlovich said the substantial growth in total revenue — up 12% year over year and an increase of more than 70% since 2016 — demonstrates “a very telling story about the success of our organization,” which continues to advance ambitious growth plans in Western Pennsylvania and statewide.

Operating income — profit after deducting operating expenses — ballooned by 250%, up to $836 million for 2020, according to UPMC’s unaudited year-end financial documents.

“We used that (income) to run our operations, to fund our capital expenditures and create new programs,” Karlovich told reporters on a conference call to discuss UPMC’s latest financial results. “We continue to substantially re-invest in our community. … We are well-positioned to weather the storm, both operationally and financially.”

In addition to more than $1 billion in federal assistance in the form of grants and deferred payments, UPMC’s bottom line was bolstered by strong gains from its insurance arm that helped offset hospital losses during the covid-spurred lockdown, which led to the postponing of non-urgent procedures this past spring.

UPMC’s provider network spans more than 4,000 physicians, 40 hospitals and 700 doctors’ and outpatient offices.

Through December, overall outpatient revenue fell by 3%, physician revenue dropped by 5% and admissions and observations declined by 10%. But UPMC benefits from controlling both insurance and provider arms; when hospital procedures slow down, insurance claims and payouts go down, too.

“On the provider side, our volumes were off slightly primarily due to the covid activity which happened in the early part of the year … and we continued to recover during the second half of the year,” Karlovich said. “Our insurance plan continued to perform well during that time period.”

Insurance rolls grow as more need individual coverage

UPMC Health Plan grew its total insurance membership by 11%, for a total of 3.97 million members, up from 3.5 million in 2019.

“We see our growth coming across all sectors. We have grown our employer coverage to about 15,000 employers in Pennsylvania. We have also seen tremendous growth in our government products, including Medicaid,” said Diane Holder, president of UPMC Insurance Services Division and president and CEO of UPMC Health Plan. “As the economy has suffered, people with commercial coverage have had some difficulties, and we’ve seen increasing numbers of folks moving to a Medicaid product or an individual product.”

Employer groups using UPMC insurance plans grew by 7% while membership in UPMC’s government-subsidized plans (Medicare, Medicaid and Community Health Choices managed care for at-home services) climbed by 17%.

Holder said she expects the insurance rolls to continue to grow with the recent three-month extension to sign up for Pennie, Pennsylvania’s new exchange for Affordable Care Act plans, through mid-May.

UPMC boasted a 9.4% return on its investment portfolio. It finished 2020 with $9.9 billion of cash and investments, up from $6.6 billion the same time last year — which Karlovich says “ensures long-term sustainability as well as our ability to invest in clinical and other opportunities as they arise.”

With more than 90,000 employees and a headquarters in Downtown Pittsburgh’s U.S. Steel Tower, UPMC remains the largest employer in Pennsylvania outside of the government. Its net assets now total $9.42 billion, up from $8.31 billion at the end of 2019.

The nonprofit system — which must pump profits back into operations, investments and community benefits — says it doled out about $1.4 billion in free and discounted care, charitable contributions and other types of benefits for the general public in the 2019-20 fiscal year.

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