UPMC posts $277M operating income in first 9 months on back of strong insurance business

A financial chart
The University of Pittsburgh Medical Center reported a favorable $277 million in operating income in the first nine months of the year despite lower patient volumes due to the COVID-19 pandemic. (Getty/Ca-ssis)

The University of Pittsburgh Medical Center (UPMC) posted operating income of $277 million for the first nine months of the year as the system has weathered a financial crisis caused by the COVID-19 pandemic.

The 40-hospital system’s financial earnings, released Tuesday, also show how its insurance business has helped compensate for declines in patient volume due to the COVID-19 pandemic in March and April.

“During this unprecedented period, UPMC clinicians and facilities have demonstrated unparalleled preparedness in safely delivering outstanding clinical care to both COVID and non-COVID patients,” said Edward Karlovich, UPMC’s chief financial officer, in a statement.

Overall, the system’s operating revenues increased 11% to $17 billion over the first nine months of the year. A major highlight has been UPMC’s insurance division, which grew by 9% over the first nine months to a total of nearly 4 million customers.

RELATED: UPMC posts $59M operating income for first half of year as insurance business sees boost

At the same point, UPMC grappled with a decline in patient volumes as it had to cancel elective procedures to preserve capacity for fighting COVID-19.

“In the midst of the pandemic, UPMC outpatient revenue decreased 4%, physician revenue was down 6%, and admissions and observations decreased 11% compared to the same period a year ago,” UPMC said.

But UPMC reports that its clinical volumes are steadily “increasing back to pre-pandemic levels as we have proven the safety of our hospitals.”

UPMC also spent $599 million in capital expenditures during the first nine months of the year. The system added a $12 million inpatient wing to the UPMC Children’s Harrisburg hospital and another $87.5 million in renovations and additions to UPMC West Shore hospital in Mechanicsburg, Pennsylvania.

The results come as other hospital systems have had to curb capital spending due to the revenue loss from the pandemic. Many systems continue to face patient volumes below pre-pandemic levels and face lingering financial losses.

RELATED: Hospitals could be facing lower patient volumes for a while due to COVID-19. How are they responding?

But UPMC has been buttressed by growth in its insurance business.

The system’s health insurance operating income grew by $317 million in the first nine months of the year compared with the same period the year before. UPMC attributed the growth to increased enrollment and better operating of its Community HealthChoices, the managed care program for dual-eligible beneficiaries.

Another major boon was decreased expenses thanks to medical care volume declines caused by COVID-19.

UPMC also was helped by relief funding. The system got approximately $400 million from a $175 billion fund included in the CARES Act, and UPMC recognized $318 million of that as operating revenue for the first nine months of the year.

UPMC also received $840 million in advance payments under the Centers for Medicare & Medicaid Services’ Accelerated and Advance Payment Program. The money, however, is essentially a loan and must be repaid.

The system also increased its working capital by taking on $2.17 billion of debt to help weather the financial storm caused by the pandemic.