Despite revenue jump, UPMC operating income falls 47% in second half of 2016

Pittsburgh-based UPMC saw revenues increase in the second half of last year, but the system ended the period with lower operating income than in the last six months of 2015.

UPMC recorded revenues of $6.8 billion in the six-month period that ended Dec. 31, up nearly 9 percent from revenues of $6.3 billion in the same period of the year prior. The increase was largely attributable to growth in UPMC's insurance division and higher patient volumes.

UPMC said medical-surgical admissions and observations cases were up 8 percent in the second half of 2016 compared to the same period of 2015. The system's health plan membership grew 7 percent year over year to more than 3 million members.

After factoring in a 10.8 percent year-over-year increase in expenses, UPMC recorded operating income of $106 million in the second half of 2016, down 47.3 percent from operating income of $201 million in the same period of the year prior. "Prior year operating income benefitted from $46 million of interest and favorable adjustment of reserves related to the Highmark Oncology arbitration ruling," said UPMC. "The remaining decrease versus prior year was driven by expense inflation, payer mix and physician and other investments."

UPMC reported an operating margin of 0.6 percent for the second half of last year, compared to an operating margin of 2.2 percent in same period of 2015.

After adding in higher investment income and a $481 million inherent contribution, the system ended the second half of 2016 with net income of $616 million, compared to a net loss of $95 million in the same period of the year prior.

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