Despite tough factors, UPMC sees some growth

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A shrinking health care market, falling reimbursements and growing competition mean UPMC is not likely to create new jobs at the same pace as in past years, in fact, Pittsburgh's largest employer recently cut some pos

But CFO Robert DeMichiei said Thursday that the health system is still adding jobs systemwide, and seeing growth in key areas such as patient volume and revenue, physician revenue and health plan membership.

Overall market factors resulted in UPMC's operating income falling to $146 million for the first nine months of the fiscal year that ends June 30, down from $290 million during the same period a year ago. Third quarter operating income did get a $53 million boost with the March sale of dbMotion, which integrates electronic medical records.

UPMC's operating revenue over the nine-month period rose from $7.22 billion to $7.58 billion compared with a year ago.

Reduced payments from government programs such as Medicare and Medicaid have cost the health system $18 million over the first three quarters of the current fiscal year, said Mr. DeMichiei. And with the emergence of national insurers in the local market, "I think we're going to continue to see very competitive rates."

In response, the health system is streamlining its operation and becoming more efficient with fewer people, said Mr. DeMichiei at a media briefing at UPMC offices in the U.S. Steel building Downtown.

He said some jobs have been eliminated, primarily in administrative areas and including some vice presidents.

UPMC is still seeing a net growth in jobs, just not at the levels of previous years, he said. While the health system might see a net gain of 2,000 or so employees annually in previous years, the gain may be only about 500 now. The last time UPMC saw a quarterly net employee loss was early 2010.

"We're not looking at any kind of mass layoff, but what we're saying is that [the net addition of new jobs] is going to flatten," said Mr. DeMichiei.

Despite the external pressures on its bottom line, he said the health system's diversified portfolio, with a provider network, an insurance arm and its international initiatives, provides UPMC stability. If one area is underperforming, another can pick up the slack.

This time, it was the health system's investment portfolio that came through. UPMC's investment portfolio is now valued at an all-time high of $4 billion -- a gain of $263 million for the nine months -- although UPMC Treasurer C. Talbot Heppenstall, Jr. noted, "The money is there not for any other purpose but to reinvest."

At the briefing Thursday, Charles Bogosta, president of UPMC's international and commercial services division, reported that after initial start-up costs the division has generated $60 million in profit the past five years. Each of its overseas initiatives is now profitable, he said, other than UPMC Beacon Hospital in Dublin which is breaking even. Today, "That hospital is full and it's viewed as one of the top three hospitals in the country," he said.

Mr. Bogosta also said the health system is launching UPMC Advisory Services to bring expertise to other parts of the world, including a new relationship with Kazakhstan. The new service will not involve any financial investment on the part of UPMC.

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Steve Twedt: or 412-263-1963.


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