UPMC reports 'robust growth' in second half of 2008
University of Pittsburgh Medical Center officials on Thursday said a midyear financial report showed "robust growth," even as they repeated warnings that more layoffs and other cutbacks may be necessary due to a worsening economy.
UPMC's operating income from patient services for the six months ended Dec. 31, 2008, was $103 million, up 3 percent from $100 million a year ago. The current year's results for the first time included operating income from the acquisition of Mercy Hospital last year.
The economy took a steep toll on UPMC's investment portfolio, which dropped in value during the six months by $786 million to $2.5 billion. UPMC said the decline in its investment portfolio represented an unrealized "paper" loss. The portfolio's value declined 24 percent in 2008, which was better than a 37 percent decline in the benchmark Standard & Poor's 500 index, officials said.
Operating revenue for the six-months rose to $3.85 billion, compared with $3.37 billion in the same period a year earlier
"Health care is becoming a discretionary expense, like buying gasoline," said Robert DeMichiei, UPMC's chief financial officer, during a briefing on the health care system's performance. "It is an unprecedented, terrible economy," he said, adding that all cost-cutting measures, including layoffs were "on the table. We're going to be proactive."
DiMichiei said that without the addition of Mercy, there would still be a slight increase in UPMC's performance. He said the inpatient volume throughout the 20 hospital system was virtually flat while growth was recorded in outpatient services.
Total admissions, including Mercy, were up 10 percent to 93,614 while outpatient volume jumped 16 percent.
He said UPMC's results reflects the fact that consumers are voluntarily rationing health care and postponing treatment, particularly for optional services.
"They're holding off, and they're waiting," he said. "We don't see it getting better anytime soon."
He said with layoffs growing in the region, UPMC is also experiencing more patients shifting from commercial insurance plans to lesser paying Medicaid or even no coverage at all.
In addition to the 500 layoffs implemented in October, UPMC recently announced that executive-level employees will have their salaries reduced by up to 25 percent, with Chief Executive Officer Jeffrey Romoff, taking a slightly higher, but unspecified hit. Romoff earned a little over $4 million in salary and benefits last year, according to UPMC's tax return.
UPMC spokesman Paul Wood said those executive pay cuts would impact about 500 people.
In addition to the possibility of more layoffs at UPMC, DeMichiei said the system will be examining "all aspects of controllable expenses" and looking at areas of possible integration and consolidation. "We've got to maintain the profitability," he said.
Even so, DeMichiei said the health care firm would still be hiring new employees as needed in growth areas.
Officials said the tightening economy has not impacted ongoing capital projects and a $100 million bond issue was recently sold to investors. Another $200 million to $250 million bond issue is expected in the coming months, said Treasurer C. Talbot Heppenstall Jr.
DeMichiei said it was too soon to determine what effect, if any, the pending federal stimulus package will have on the health care system and Medicare reimbursements. Noting the state's deficit situation, he said any revenue increases from that sector for Medicaid were not likely. Medicare and Medicaid accounted for 56 percent of UPMC's income in the six months ended Dec. 31.
