UPMC income increases amid patient volume drop

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Patient volume at UPMC hospitals was down for the first three months of 2014, but the region’s largest health system still saw a slight overall increase — from $62 million to $65 million — in operating income compared with the same period a year earlier.

UPMC CFO Robert DeMichiei attributed the drop in patients to the unusually harsh winter — “We had three or four days where people just didn’t show up” — and the trend toward higher-deductible insurance plans in which the consumer’s deductible out-of-pocket costs starts over each Jan. 1.

For the first nine months of the current fiscal year ending June 30, UPMC reported $176 million in operating income, compared with $146 million for the same period a year earlier. Mr. DeMichiei acknowledged that he would like to see the system’s operating margin of 0.8 percent improve. For the same nine months a year earlier, the operating margin was 1.9 percent.

From July 1 through March, membership in the health giant’s insurance arm, UPMC Health Plan, grew from 2.1 million a year ago to 2.3 million.

At a press briefing Wednesday at UPMC corporate offices in the U.S. Steel building, Mr. DeMichiei and treasurer C. Talbot Heppenstall Jr. said the health system continues to prepare for what Mr. DeMichiei called the “100 percent chance” that its contract with Pittsburgh insurer Highmark will not be renewed or extended past its Dec. 31 expiration.

“We are quite confident we will be just fine,” said Mr. DeMichiei, emphasizing that “it would be an unacceptable risk” to contract with Highmark because UPMC officials believe the insurer would steer patients to hospitals in its own Allegheny Health Network.

Highmark has said it wants to negotiate a new contract that would keep its members in UPMC’s network. Instead, UPMC wants Highmark to collaborate on making the pending separation a smooth transition.

“This transition plan should be happening,” said Mr. Heppenstall, “and all we see is commercials.”

Steve Twedt: stwedt@post-gazette.com or 412-263-1963.

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