The University of Pittsburgh Medical Center (UPMC) posted $1 billion in revenue after expenses for 2020, despite drops in surgery admissions and outpatient revenues caused by the COVID-19 pandemic.
The 40-hospital system and insurer released its 2020 earnings Monday and became the latest large hospital system to end 2020 on a bright financial note. Large systems have been able to tap liquidity and rely on provider relief funding to make up for patient volume shortfalls caused by the pandemic.
UPMC’s $1 billion in revenue after expenses is a major increase from the $420 million it generated in 2019. It generated $23 billion in operating revenue for 2020 compared to $20 billion the year before.
In addition, the system’s operating income at the end of 2020 was $836 million, an increase of more than $239 million from 2019 thanks to the system’s insurance business.
“The increase in operating income versus prior year is a result of improved financial performance within the insurance services division due to increased enrollment, decreased medical utilization as a result of the COVID-19 pandemic,” the earnings report said.
Another key performer was a new Medicaid managed care plan called Community Health Choices.
UPMC’s insurance division grew enrollment to 4 million members by last month and generated $11.4 billion in revenue. The insurance business also ended 2020 with an increase in operating income of $405 million compared to 2020.
UPMC’s enrollment grew to 4 million in January 2021, up from 3.7 million members in the same month last year.
The enrollment boost occurred even as commercial insurance business declined to 678,666 in January 2021 compared with 713,940 members in January 2020. Commercial plans have faced membership declines due to job losses stemming from the pandemic.
But the system saw increases in its Medicare plans (198,119 in January 2021 compared with 189,865 in January 2020) and an increase in its managed care plan (133,320 last month to 123,043 in January 2020).
The insurance division’s healthcare spending ratio, which represents the amount of money dedicated to medical expenses, also decreased to 86.4% by the end of the year “as a result of decreases in claims expenses as a result of the COVID-19 pandemic,” the earnings report said. UPMC’s health plan had a healthcare spending ratio of 89.3% in March 2020 before the start of the pandemic.
The improvement in the insurance business helped UPMC make up shortfalls in patient volume caused by the pandemic.
The system’s medical-surgical admissions and observation cases decreased 10% in 2020 compared to 2019. Outpatient revenue per workday also declined by 3% compared to the year before.
Physician service revenue for UPMC per weekday also declined 5%, according to the earnings report.
Hospitals across the country have faced plummeting patient volumes at the onset of the pandemic in March and April as they were forced to cancel or postpone elective surgeries to preserve the capacity to fight the virus.
Patient volumes rebounded in late spring and summer but have remained below pre-pandemic levels for some systems.
UPMC was able to be helped by provider relief funding. It got $460 million from a $175 billion fund created under the CARES Act and recognized approximately $380 million as operating revenue for 2020.
It also received $840 million in advance Medicare payments that must be repaid to the federal government.
UPMC was also aided by $242 million in gains from investing and financing activities, representing a trend of larger systems relying on liquidity and access to capital to help increase its earnings for 2020.