Healthcare giant Highmark Health saw its revenue grow 24% in the first half of the year to reach $12.9 billion and reported an operating gain of $387 million.
But the Pittsburgh-based payer-provider organization also reported a net loss of $174 million for the six-month period, as it suffered a $460 million decline in its investment activity, according to the company's first-half financials released Tuesday. That's down from a net gain of $585 million during the first six months of 2021.
Highmark reported an operating gain of $507 million during the first half of 2021.
"We reported strong financial performance across the first half. However, we're not immune from the many financial headwinds that the entire industry has faced. These include labor shortages, supply chain disruptions and inflation pressures alongside the unrealized impact of financial markets on our investment portfolio," Highmark Health President and CEO David Holmberg said during a call with reporters Tuesday.
Holmberg was confident about Highmark's financial performance, saying the organization was "built to weather the storm." He cited the organization's diversified business operating model, "unique growth strategy, national scale and scope and financial strength and stability" as positive factors.
Highmark has no plans to change its investment strategy, despite the losses, Saurabh Tripathi, chief financial officer of Highmark Health, told reporters during the call. "Highmark has a very strong investment portfolio. We are a long-term investor," he said.
He cited the positive financial performance of Highmark's insurance business units during the first six months of the year driven by favorable claims and membership.
Highmark Health's balance sheet included $11 billion in cash and investments and net assets of $9.7 billion as of June 30.
Highmark Health includes payer businesses, including Highmark Health Plans, United Concordia Dental and HM Insurance Group, and a provider business arm with Allegheny Health Network.
The Highmark Health Plans reported an operating gain of more than $450 million for the first six months of 2022, primarily driven by strong membership growth, robust performance in the commercial and government businesses and favorable claims development, Tripathi said. But that's down about $30 million compared to the first half of 2021.
"Last year we were still benefiting from low utilization due to COVID, as patients were still afraid to go to hospital. This year, as COVID is somewhat behind us, we are seeing the utilization pick up a little bit. That's why the benefits you've seen last year with lower claims utilization you are not seeing that this year as much and therefore you see a net operating gain decline," Tripathi said on the call.
Allegheny Health Network, meanwhile, experienced a slight increase in patient volumes year over year but faced continued cost pressures due to supply chain challenges, inflation and higher labor costs, according to the company.
The company's health system arm reported losses before interest, taxes, depreciation and amortization of $71 million for the first six months of 2022, as rising labor and supply chain costs continued to offset stable patient volumes. Excluding unrealized investment impact, AHN's EBITDA was $18 million. It reported an operating revenue of $2 billion for the period ending June 30.
For the first half of 2022, patient volumes rose overall compared to the same period in 2021, with a 2% decrease in discharges and observations, a 12% increase in outpatient registrations excluding vaccination appointments, a 3% increase in physician visits and a 13% increase in emergency room visits. Births also increased 6% across the network compared to the first six months of 2021.
To address labor shortages at hospitals, AHN is focused on hiring nurses for its hospitals and will be increasing staffing, particularly for bedside patients, said Cynthia Hundorfean, CEO and president of AHN.
Highmark Health has a broad reach in healthcare that includes subsidiaries and affiliates that provide health insurance to approximately 6.8 million members in Pennsylvania, West Virginia, Delaware and New York, as well as dental insurance and related health products through a national network of diversified businesses. AHN is an integrated delivery network comprising 14 hospitals, more than 2,500 affiliated physicians, ambulatory surgery centers, an employed physician organization, home and community-based health services, a research institute, a group purchasing organization and health and wellness pavilions in western Pennsylvania.
EnGen, formerly known as HM Health Solutions, Highmark Health's information technology services company with a platform that serves approximately 11 million lives across the country, reported strong financial results in the first half of 2022 driven by higher platform enrollment and demand to support client projects, executives said.
Highmark High employs more than 37,000 people. Combining all its entities, Highmark Health has more than 29 million lives under contract across all 50 states and the District of Columbia.
Holmberg said Highmark continues to move forward on its strategic priorities including investing in its Living Health model. In 2020, the company inked a six-year strategic partnership with Google Cloud to use cloud, analytics and artificial intelligence technologies to power the organization's digital health initiatives.
Highmark Health is using Google's cloud technology muscle to be the innovation engine behind its Living Health model, which is designed to provide a more coordinated, personalized, technology-enabled experience for patients, the organization said.
The company launched Well360 Diabetes Management to members, with simple and proactive support to better manage the chronic condition, improve health outcomes and reduce costs, and also expanded its wellness portfolio with Well360 Motion, a virtual musculoskeletal pain program.
The company has teamed up with Civica Script to manufacture and distribute affordable insulin.
In June, Highmark Health and AHN launched a multiyear initiative to create a high-performing social care network that will compensate nonprofits that address social determinants of health such as food insecurity, transportation barriers and housing for patients referred by the healthcare system. In the first year of the pilot, 20 nonprofits that serve Allegheny and Westmoreland counties will participate in the program and have the potential to earn value-based reimbursement.
AHN also launched First Steps and Beyond, a program that tackles the health and well-being of African American parents and infants during delivery and through the first year after birth.