The University of Pittsburgh Medical Center posted a slim $5 million profit for fiscal 2008 -- down from a record $612 million profit the previous year -- as the region's biggest employer and dominant health care provider saw its investment portfolio ravaged by turmoil in the financial markets.

UPMC's investments returned a negative $128 million for the 12 months that ended June 30, nose-diving from a $403 million gain in fiscal 2007.

The giant medical center's other core revenue generator -- its hospitals, doctors and health insurance plans -- also didn't do as well profit-wise compared with the previous year, as operating income skidded 16 percent to $184 million, down from $220 million.

UPMC said results for those operations were hurt by major capital improvements locally, higher investments in health care facilities overseas, lower hospital reimbursement rates from the federal government and an $11 million donation to the Pittsburgh Promise, a scholarship program for children in the Pittsburgh Public Schools.

Profits also were hit by a special charge of $47 million in the June quarter related to the old Children's Hospital facility that UPMC will leave behind in Oakland when it moves into new digs in Lawrenceville in May. UPMC will largely abandon the old Children's campus and doesn't think the cost of refurbishing the buildings for a different use is worth it.

"We don't know exactly what we are going to do with it," Chief Financial Officer Robert DeMichiei said in a briefing with reporters yesterday.

Overall, operating revenue -- or money generated by UPMC's hospitals, the health insurance arm and other holdings -- rose 12 percent to a record $7.02 billion, up from $6.28 billion in fiscal 2007.

Revenue was driven by a 7 percent rise in hospital admissions, 10 percent jump in enrollment in UPMC's insurance plans and the acquisition of Mercy Hospital in January.

The fact that UPMC barely posted a profit for the full year could be seen as bad or good, depending on the perspective. When it comes to "nonprofits" such as UPMC, if profits are too high, some people complain that the organization should start paying federal income taxes. If profits are too low, worries about the medical center's financial health mount.

Mr. DeMichiei said results show UPMC is on solid footing, as evidenced by the organization's strong cash flow of $513 million in fiscal 2008, down only about 1 percent from $520 million the year before. Cash flow -- measured as earnings before interest expense, depreciation and amortization -- is the "lifeblood" for capital intensive industries such as the heath care business because it represents money available to maintain and upgrade facilities and equipment, Mr. DeMichiei said.

Still, he said, the health care business is becoming "increasingly challenging" as federal reimbursements fall, the number of uninsured Americans grows and rising inflation boosts costs.

As for UPMC's sagging investment portfolio -- the primary source of the medical center's big profits in recent years -- no changes are planned to the overall mix of investments, Treasurer Talbot Heppenstall said.

The portfolio is well diversified, he said, noting that UPMC's long-term investment strategy has generated a five-year annualized return of 10 percent.