Dive Brief:
- UPMC reported $9.25 billion in operating revenue for the first six months of 2018, an increase of 27% from $7.52 billion over the same period in 2017.
- The integrated health system also reported $176 million in operating income for the first half of 2018, up 30% from $135 million year over year. In the first quarter of 2018, UPMC reported an operating income of $92 million on revenue of $4.6 billion.
- The health system also saw admissions and observations increase 23% for the first half of 2018 year over year. According to local media, executives told investors the company is planning on expanding into neighboring states New York, Maryland and Ohio and further into Pennsylvania, except the already-saturated Greater Philadelphia region.
Dive Insight:
UPMC continues to rake in income from Harrisburg, Pennsylvania-based PinnacleHealth, which the company acquired a year ago next month. That purchase was UPMC's largest-ever, and its first acquisition of an entire health system.
Thanks to that buy, UPMC is coming off a strong couple of quarters. In addition to ending 2017 with a bang, last quarter was one of the system's most profitable quarters in seven years, according to the company's CFO, Rob DeMichiei.
Revenue at UPMC is increasingly reliant on Medicare as the silver tsunami rises. Medicare was responsible for 42% of the health system's net patient service revenue for the first six months of 2018 compared to 39% in 2017. Commercial payments accounted for 35%, Medicaid made up 15% and self-payers were 8% of net patient service revenue in 2018.
UPMC's revenue has been aided by its growing insurance arm. Insurance services accounted for 14% of patient service revenue for the company in the first six months of 2018 compared to 13% for the same period in 2017. Membership continued to grow in the first half of the year, reaching 3.4 million at the end of the second quarter — a 7% increase compared to the same period in 2017.
Regarding expansion, UPMC is planning on venturing into neighboring markets, some of which it is already involved in through partnerships, such as a nascent collaboration with Western Maryland Health System. Leslie Davis, executive vice president and chief operating officer of UPMC's health services division, told investors the company has big plans for growth in the near future.
"When you think about how close Hamot is to New York, how close Jameson is to Ohio, how close Altoona is to western Maryland, we see ourselves growing more and more over the next few years," Davis said, according to local media.
UPMC does not plan on touching Southeastern Pennsylvania, where it would face competition from Penn Medicine, Jefferson Health, St. Luke's University Health Network and Lehigh Valley Health Network. It will, however, continue to face competition from the lean, omnipresent integrated system Geisinger as well as Penn State Health and partner Highmark Health.