University of Pittsburgh Medical Center (UPMC) generated $59 million of operating income in the first half of the year as the Pennsylvania-based health system’s insurance business helped offset drops in patient volume.
Overall, it was a decline of almost 37% from the $93 million in operating income UPMC reported in the first half of 2019. That was on operating revenues of $11 billion, up about 9% in the first half of 2020 compared to about $10 billion in revenue in the same period a year earlier.
“During this unprecedented period, UPMC clinicians and facilities were prepared to care for the potential surge of COVID-19-positive patients while also safely providing life-saving care to our non-COVID- patients,” said Edward Karlovich, UPMC’s vice president and interim chief financial officer.
States required hospitals to cancel or postpone elective surgical procedures to preserve hospital capacity and supplies. At the same time, outpatient volumes declined as patients were reticent to head to the doctor’s office.
UPMC said that clinical volumes have begun to “return to pre-pandemic levels during the second quarter.”
For the first six months of the year, surgeries and observation cases declined by 13%, and outpatient revenue per workday decreased by 4% compared to the same period in 2019. Physician service revenue also decreased 14% from 2019.
The decline in volumes led to a $216 million loss in operating income in its health services side of the business during the first half of the year. UPMC also reported a massive loss from investments and finances of $423 million due to COVID-19’s impact on the economy.
But UPMC was helped by a 9% increase in the system’s insurance business. The insurance arm posted $275 million in operating income in the first half of the year. This was due to an increase in enrollment to nearly 3.9 million members coupled with a decline in healthcare use due to the pandemic.
UPMC also reported it received $800 million in advance payments from the Medicare Advance and Accelerated Payment Program. The payments, however, are loans that have to be repaid starting this month.
The system’s facilities also got $400 million from a $175 billion provider relief fund that was passed by Congress as part of the CARES Act.
Of that $340 million, UPMC recognized $257 million of it as operating revenue in the second quarter of the year.
The latest spate of earnings for the second quarter and first half of 2020 have been a mixed bag for hospital systems.
Some large systems such as HCA Healthcare, Tenet and Universal Health Services posted profits in the second quarter of the year thanks in part to relief funding. But other health systems like Providence St. Joseph posted losses despite the added relief funding.