UPMC increased its operating revenues by nearly $1.2 billion but ultimately saw its operating income drop to $238 million (0.9% margin) and its net losses inch past $1 billion during what Chief Financial Officer Edward Karlovich described as a “difficult year in healthcare."
The Pittsburgh-based organization’s operating revenue rose to $25.53 billion, primarily driven by higher revenues from the insurance side of its business during 2022, according to financial filings for the year ended Dec. 31 and an announcement from the integrated nonprofit system.
Higher expenses on all sides of the business, however, brought total operating income down to a fraction of last year’s $843 million tally (3.5% margin), per the filing. Taking into account a $76 million expense related to lease impairment lowered 2022’s operating income even further, to $162 million (0.6% margin).
Additionally, a nearly $1.1 billion loss from investing and financing activities dragged 2022’s bottom line, whereas 2021’s $810 million investing and financing gain had helped propel UPMC to a $1.5 billion net income a year ago.
Despite the operating and investment hurdles facing much of the healthcare industry, Karlovich said UPMC maintained its strategic investments toward expanding care access to the tune of nearly $1 billion in capital expenditures.
“Our commitment to UPMC’s core mission did not wane,” he said in a statement. “We substantially invested for the long-term, improving access to our clinical care and community services throughout all our regions with emphasis on meeting strong patient preference for care to be provided more conveniently in ambulatory settings closer to home.”
Total operating revenue within UPMC’s health services business rose from $14.3 billion in 2021 to $14.7 billion in 2022. This was due to a 7% increase in outpatient revenue per workday and a 3% increase in physician service revenue per weekday and was tempered by a 6% decline in total inpatient activity (medical-surgical admissions and observation visits).
The revenue bump was largely outpaced by total operating expenses’ increase from $13.7 billion to nearly $15 billion, driven in large part by an $832 million (10.7%) jump in salaries, professional fees and benefits.
UPMC noted that “a major part” of its $300 million workforce investment during 2022 went toward developing workforce retention, recruiting and training. It also scheduled minimum wage increases to $18 per hour for non-union employees by 2025 or 2026, depending on location.
The insurance services business, meanwhile, increased its total operating revenue by $934 million while its expenses only rose by $632 million, according to the filing.
Membership rose 9% over the prior year, with enrollment during the second half of the year seeing “significant growth” primarily due to behavioral health product growth and Medicaid expansion into seven eastern Pennsylvania counties. The trailing 12-month medical expense ratio dipped from last year’s 86.9% to 85.5% as of Dec. 31, having peaked in March at 87.4%.
UPMC’s release announced the year-end performance regional growth for its UPMC for KIDS CHIP plan, 31,000 new enrollees through the state-based health insurance marketplace and the highest-ever enrollment for UPMC Community HealthChoices, its managed care services coordination program.
UPMC is among the largest nonprofit health systems in the country. It comprises 40 hospitals and 800 clinical locations alongside its insurance plans and other offerings. As of Dec. 31, it had $8.7 billion in total cash and investments (down from last year’s $10.7 billion) and 109 days of cash on hand (down from 148).
The nonprofit has come under scrutiny from state lawmakers for its large share of the market in certain Pennsylvania counties and alleged anti-competitive practices. UPMC has said the claims and data points cited by the lawmakers “have been reported in the past and debunked.”