In a new financial filing, Highmark Health reported net income of $1.1 billion in 2017, an improvement on 2016's $1 billion net income.
Highmark, which includes its payer subsidiary as well as the eight-hospital Allegheny Health Network, announced $616 million in operating income, which was an increase of $62 million over the previous year.
The company said its strong performance was partly because of payer commercial and government segments and Allegheny Health Network’s “operational progress and growth.”
Highmark said total revenues were $18.3 billion, a slight increase over $18.2 billion in 2016. The Pittsburgh-based company enjoyed assets of $6.5 billion, which was an increase of 25% over 2016. Highmark’s cash and investments also grew to $7.9 billion by the end of the year.
Karen Hanlon, executive vice president and chief financial officer, said 2017 was a “watershed year for Highmark Health's financial performance, as we were able to sustain the solid performance that we reported at mid-year, driven by strong overall results in the health plan's government and commercial books of business, including a substantial turnaround in the ACA business.”
Hanlon said Allegheny Health Network improved its operational performance for the fourth consecutive year. Allegheny had its best operating performance with $3.1 billion in revenues, which was a nearly 8% increase over the previous year. Highmark said there were a number of factors to that progress, including stable hospital volumes and high patient acuity, greater operational efficiencies, better care coordination and improved business and clinical process, such as revenue cycle operations.
Physician office visits increased by more than 4% and ambulatory surgery center volume increased by 10%. However, inpatient and outpatient volumes remained flat.
“Allegheny Health Network continues to grow volumes organically, rather than through acquisition, in a market that overall continues to see volume declines,” Highmark said.
Meanwhile, the health plan reported an operating gain of $750 million, which was more than $500 million better than the previous year. The company said the gains were associated with improvements in its government business, which resulted in a $411 million improvement over the prior year. Commercial business also increased by nearly $100 million over the previous year.
Highmark said its ACA plans' performance improved and the payer enjoyed its first income from those plans in 2017. The improvement came from reducing administrative costs and implementing value-based initiatives. Highmark wasn't alone in turning a profit on the individual market, according to a recent Politico analysis. Experts warn, however, that the next couple of years are likely to be turbulent for ACA marketplaces with the end of the individual mandate penalty and the expansion of short-term and association health plans.
Highmark finished the year with 4.6 million members spread across Pennsylvania, West Virginia and Delaware. The payer is the largest commercial health plan in Pennsylvania with 3.9 million people, which is a 37% market share. Western Pennsylvania's market share is even better — 48% of the commercial market. Highmark also has a 35% market share in western Pennsylvania for traditional Medicare Advantage plans, it said.
One negative reported for 2017 was that Highmark’s stop-loss business, HM Insurance Group, reported a $30 million operating loss. The company blamed stop loss and managed care reinsurance “headwinds” for the loss, but said it is working to mitigate the losses with “disciplined pricing actions and enhanced care initiatives.”