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UPMC reports $1.3 billion profit, touts insurance growth

| Thursday, March 1, 2018
University of Pittsburgh Medical Center offices in Downtown Pittsburgh
Keith Srakocic/AP
University of Pittsburgh Medical Center offices in Downtown Pittsburgh

Driven by an 8 percent increase in its health insurance business, health care giant UPMC reported profits of $1.3 billion for calendar year 2017.

Revenue for UPMC was $16 billion and its insurance services division now has 3.4 million members, officials said Wednesday. The region's largest health insurer switched its fiscal year to a calendar year last year to be in line with its insurance business, said Robert DeMichiei, UPMC executive vice president and chief financial officer.

UPMC's operating revenue for 2017 was $15.6 billion, up from 2016's total of $13.4 billion. Operating income was $245 million in 2017, compared with $215 million for the previous year. Operating EBIDA — earnings before interest, depreciation and amortization — was $789 million, up from $682 million for 2016. Investment return on its $7.5 billion portfolio was 13.6 percent.

Diane Holder, UPMC executive vice president and president of UPMC Insurance Services Division, said 385,000 more people now have UPMC health coverage compared with four years ago, giving it 31 percent of the local market.

“We have had great growth in Western Pennsylvania, and we're expanding in Central Pennsylvania,” said Holder, adding that UPMC's insurance offerings can be found as far east as Berks County. She also said UPMC will continue to grow its market presence in the central and eastern part of the state in the coming months.

“We have a high retention rate,” Holder said. “People come to us and don't leave.”

In November, UPMC announced a $2 billion investment in three new hospitals focused on cancer, organ transplants, heart and vision care. The hospitals will be built on the campuses of UPMC Presbyterian in Oakland, UPMC Mercy in Uptown and UPMC Shadyside. Mercy will be the first hospital to to break ground. All three are targeted for completion in 2022.

“We are going to continue to see good growth,” Holder said.

The subscriber base is expected to jump to 3.5 million in the next 12 months, he added.

“We'll be even more attractive with the new hospitals,” she said.

UPMC and UPMC Health Plan compete with Allegheny Health Network and Highmark Health for customers.

A state-brokered consent decree that has preserved access for some Highmark members to UPMC hospitals expires in 2019.

Holder said she doesn't see the expiration of the consent decree having much of an impact on patients.

“People recognize they have choice,” she said.“They chose based on what they value.”

The health insurer said it spent $736 million in 2017 on investments to enhance quality and care. It also contributed $118 million into the UPMC employee pension plan.

“The pension plan is fully funded,” DeMichiei said.

Membership in the UPMC Medicare Advantage now totals 174,136, up from 123,353 in February 2014. Also, UPMC said 42,200 people are now members of its PA Community Health Choices plan — a mandatory managed care program for people who are eligible for medical assistance and Medicare.

Suzanne Elliott is a Tribune-Review staff writer. Reach her at selliott@tribweb.com, 412-871-2346 or via Twitter @41Suzanne.

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