UPMC's 2Q Profit Sinks 54% on High Expenses, Low Reimbursements

High expenses, lower federal reimbursement for patient services and sluggish investments caused University of Pittsburgh Medical Center's (pdf) second-quarter profit to fall 53.8 percent, from $143.7 million a year ago to $66.4 million this year.

UPMCUPMC's expenses were 9.5 percent higher in the second quarter of its 2013 fiscal year, while net patient service revenue dropped 1.6 percent. UPMC also said net income in the second quarter was down compared with last year due to increased physician investments, and the second quarter of FY 2012 also benefited from $42 million of "non-recurring activity."

Overall, total operating revenue, which included revenue from UPMC Health Plan, increased 7 percent in the second quarter, totaling $2.52 billion. The healthcare giant touted its health plan in the second quarter, as UPMC Health Plan member enrollment increased 22 percent and now exceeds more than 2 million total members.

"The new supra-competitive insurance market benefits the entire community, but decreases UPMC's profitability," UPMC CFO Robert DeMichiei said in a news release. "It has always been our strategy to be ahead of the curve…with declining reimbursements and other economic pressures, we will continue, as we always have, to improve administrative efficiencies to realize economies of scale."

Despite the lower profits, UPMC is still recording a much better first half of its 2013 fiscal year compared with 2012. For the six months ended Dec. 31, 2012, UPMC's profit totaled $246.6 million, significantly higher than the $23.6 million of profit it recorded in the first six months of FY 2012. Last year, UPMC suffered from massive investment losses.

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