UPMC operating income falls as revenues climb by $1 billion

UPMC's revenues climbed by $1 billion last fiscal year as its operating income fell by 23 percent, the health system reported Wednesday.

UPMC reported operating income of $240 million on revenues of $14 billion for the 2017 fiscal year, which ended June 30.

The revenue, augmented by an affiliation with UPMC Susquehanna in the north-central part of the state, was up from $13 billion for the 2016 fiscal year, while its operating income declined from $310 million, according to the results.

The health system's growing insurance division, UPMC Health Plan, now makes up about half the organization's business, Chief Financial Officer Rob DeMichiei said.

The Health Plan is committed to selling plans on the Affordable Care Act marketplace in the years to come despite uncertainty surrounding the marketplace because of potential changes by the federal government, DeMichiei said.

A Senate committee that oversees health is expected to start holding hearings next week on ways to stabilize the ACA marketplaces following a failed July vote to repeal and replace the law. Premiums for marketplace plans are expected to increase an average of 8.8 percent in Pennsylvania for 2018 following two years of larger increases. DeMichiei said the relatively small increase indicates the market is stabilizing.

“I'd argue that the exchanges in Pennsylvania have been a success,” he said.

Between hospital services and insurance premiums, UPMC has broken even on the ACA plans in recent years, DeMichiei said. He said he expects the insurance division soon will start to break even on the plans on its own without factoring in income from providing treatment.

UPMC reported $991 million in net income for the fiscal year. Hospital admissions and outpatient and physician revenues increased slightly, according to the results.

The organization also reported $912 million in community benefits spending for the 2016 fiscal year, the most recent year for which figures are available, according to a report.

The total included $217 million for free and subsidized programs that provide immunizations, medications, home visits, trainings and other services, according to the report. About $288 million went to covering charity care and unreimbursed costs of treating Medicaid patients. About $407 million went to medical research and medical education, according to the report.

Wes Venteicher is a Tribune-Review staff writer. Reach him at 412-380-5676, wventeicher@tribweb.com or via Twitter @wesventeicher.