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Unaudited Quarterly Disclosure Statement
For the period ended December 31, 2012

First Six Months of FY2013 Financial Results
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UPMC’s Financial Results for First Half Fiscal Year Reflect The Changing Health Care Market

  • UPMC’s operating revenues grew by $203 million to nearly $5 billion, with an operating income of $85 million. Net income of $247 million reflects positive investment returns.
  • UPMC’s operating EBIDA – or cash flow income – was $293 million.
  • UPMC Health Plan total membership grew 22% and now exceeds 2 million.
  • UPMC continues to advance patient care in the region, investing $281 million in capital expenditures and $136 million to fully fund employees’ pensions during the first six months of fiscal year 2013.
  • UPMC’s commitment to the community is evident in its $622 million in community benefits for fiscal year 2012 and $3.2 billion over the past five years.

PITTSBURGH, Feb. 7, 2013 – UPMC’s financial results for the first six months of fiscal year 2013 reflect the changing health care market. While UPMC’s provider services growth is flattening, UPMC Health Plan growth continues to accelerate at double-digit rates.

UPMC’s operating revenues increased by $203 million to nearly $5 billion for the first half. Operating income for the six months ending Dec. 31, 2012 was $85 million. The prior year operating income of $220 million benefitted from $42 million of non-recurring activity. The decline in operating income is due mainly to a $49 million decrease related to insurance rate compression, $39 million in increased physician investment, and general expense inflation, which more than offset an increase in revenue growth for Provider Services volume and Insurance Services enrollment.

For the first half of fiscal year 2013, UPMC’s earnings before interest, depreciation and amortization (EBIDA) – a key measure of financial performance and the ability to generate the necessary resources for reinvestment – were $293 million. Net income of $247 million, reflecting positive investment returns, compares with $24 million in net income for the same period a year ago./p>

"The new supra-competitive insurance market benefits the entire community, but decreases UPMC’s profitability," said Robert A. DeMichiei, UPMC senior vice president and chief financial officer. "It has always been our strategy to be ahead of the curve. By operating efficiently and re-investing in world-class clinical care and state-of-the-art facilities, UPMC remains strongly positioned to continue meeting the needs of our communities well into the future. With declining reimbursements and other economic pressures, we will continue, as we always have, to improve administrative efficiencies to realize economies of scale."

UPMC Health Plan membership keeps growing at double-digit rates and now exceeds more than 2 million. Total membership increased by 22 percent and more than 1,900 new employer groups were added in the past year. UPMC Health Plan’s commercial health products grew by 13.0 percent while UPMC for Life Medicare membership grew by 14.4 percent and UPMC for You Medicaid membership grew by 52.3%. In January 2013, A.M. Best upgraded UPMC Health Plan to "A- (Excellent)" from "B+ (Good)".

UPMC’s other key operating metrics were up compared to the same period a year ago. In a continuously shrinking market with declining reimbursements, UPMC’s outpatient revenue and inpatient volume both were up 5 percent, and physician revenue increased by 6 percent. UPMC’s reputation for clinical and research advancements and accountable patient care allows it to attract physicians from around the world, nation and region as the number of employed physicians grew 4 percent to 3,384.

During the first six months of fiscal year 2013, UPMC spent $281 million in capital expenditures to advance clinical excellence, good science, smart technology and accountable care. As Pennsylvania’s largest employer, UPMC is committed to ensuring that its employees’ retirement plans are fully funded and contributed $136 million to its pension plans.

UPMC’s diversified investment reserve portfolio stands at $3.9 billion, with a 5.6 percent return for the first half of fiscal year 2013. UPMC maintains a long-term investment perspective. "Our long-term investment perspective strategy has helped us prepare to address factors related to health care reform and other economic pressures," said C. Talbot Heppenstall Jr., UPMC senior vice president and treasurer.

UPMC Provides More than Half-a-Billion Dollars in Community Benefits for Fourth Consecutive Year;
$3.2 Billion Over the Past Five Years

During fiscal year 2012, UPMC contributed $622 million in community benefits. Fiscal year 2012 was the fourth consecutive year that UPMC has contributed more than half-a-billion dollars. Over the past five years, UPMC has provided $3.2 billion to improve the health in the communities it serves and increase access to health care.

Fiscal year 2012’s total of $622 million includes: $238 million in uncompensated care for those without a means to pay and shortfalls in Medicaid programs; $96 million in community service programs and support of other non-profit organizations; and $288 million for investment in research and educating tomorrow’s health professionals.

"More than 97 percent of UPMC’s tax-exempt properties are hospital campuses and the contributions they provide in uncompensated care relieves local governments of the responsibility to provide health care for the poor and uninsured, saving taxpayer’s millions of dollars annually," said DeMichiei. "No other academic medical center in the nation does as much for its region as UPMC does for western Pennsylvania."

About UPMC

UPMC is a $10 billion global health enterprise with more than 55,000 employees headquartered in Pittsburgh, Pa., and is transforming health care by integrating more than 20 hospitals, 400 doctors’ offices and outpatient sites, a health insurance services division, and international and commercial services. Affiliated with the University of Pittsburgh Schools of the Health Sciences, UPMC ranked No. 10 in the prestigious U.S. News & World Report annual Honor Roll of America’s Best Hospitals in 2012 — and No. 1 in Pennsylvania — with 15 adult specialty areas ranked for excellence. UPMC is redefining health care by using innovative science, technology and medicine to invent new models of accountable, cost-efficient and patient-centered care. For more information, go to UPMC.com.

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