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Announces Results for Fiscal Year 2008

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Paul Wood
Vice President & Chief Communications Officer, Public Relations

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  • UPMC’s operating revenues grew 12 percent during the fiscal year, increasing by $747 million to $7.0 billion compared to last year.
  • Operating income for the year totaled $184 million. 
  • Cash flow income, defined as operating earnings before interest, depreciation and amortization (EBIDA), was solid at $513 million for the year.
  • UPMC’s strong balance sheet, cash position and investment-grade credit allow it to continue investing in the future of the global health enterprise, its facilities and the Western Pennsylvania region, as well as in strategic business initiatives to generate future revenue and jobs growth.

PITTSBURGH , Pa., August 22, 2008 — UPMC announced today that operating revenues for fiscal year 2008 grew by 12 percent to $7.0 billion, driven by growth in hospital admissions, outpatient services, insurance services membership and the integration of Mercy Hospital in January.

Operating earnings before interest, depreciation and amortization (EBIDA), a key measure of financial performance and the ability to generate resources, was solid at $513 million for the fiscal year ending June 30, 2008. Operating income was $184 million, down 16 percent compared to a year ago. The change is the result of higher depreciation expenses related to major capital investments, expenditures for various growth initiatives, lower federal reimbursement rates for patient care and UPMC’s commitment to the Pittsburgh Promise scholarship fund.

“UPMC’s strong balance sheet, excellent cash position and investment-grade credit standing benefit the communities we serve by allowing us to continue to fulfill our core mission of providing premier health care services,” said Robert A. DeMichiei, senior vice president and chief financial officer.  “Our financial strength, credibility of our financial reports and our voluntary compliance with Sarbanes-Oxley are well-recognized nationally and around the world.”

UPMC’s growth can be attributed to its continued ability to attract increasing numbers of patients, both in its hospitals and at outpatient locations, and the impact of the merger with Mercy. Enrollment in UPMC’s insurance services grew nearly 10 percent to almost 1.3 million members. Total admissions at UPMC’s 20 hospitals were up 7.1 percent to 182,278; medical-surgical admissions were up 7.3 percent; outpatient activity rose 11.5 percent; and physician service revenue increased 13.1 percent in fiscal year 2008. 

UPMC invested $629 million in capital expenditures in fiscal year 2008, up 37 percent from $458 million last year. Major projects include the construction of the new Children’s Hospital in Lawrenceville, a patient care tower at UPMC Passavant in McCandless and an outpatient facility in Monroeville, as well as the re-engineering of information technology infrastructure and investments in various patient care software applications. In December 2007, UPMC pledged an initial $10 million to the Pittsburgh Promise to help Pittsburgh Public School graduates with post-secondary education, along with an additional $90 million challenge grant intended to spur matching contributions from others in the community. 

Lower returns in the financial markets compared to last year and an accounting change in the prior fiscal year led to a reduction in UPMC’s investment income from $403 million in fiscal year 2007 to a loss of $128 million this year. “UPMC’s investment returns continue to mirror the performance of the financial markets,” said C. Talbot Heppenstall, Jr., senior vice president and treasurer. “Our investment portfolio has a long-term perspective and has generated an annualized gain of 10.1 percent over the past five years.”

With the new Children’s Hospital scheduled to open in May 2009, UPMC also recognized a one-time $47 million charge associated with accounting requirements to accelerate depreciation of the assets of its existing Children’s Hospital facility. Net income – which includes operating income of $184 million offset by negative investment income of $128 million, the existing Children’s Hospital accelerated asset depreciation charge of $47 million, income taxes and other items – totaled $5 million for fiscal year 2008.

UPMC is an integrated global health enterprise headquartered in Pittsburgh, and one of the leading nonprofit health systems in the United States. As Western Pennsylvania’s largest employer, with 48,000 employees and $7 billion in revenue, UPMC is a leader in the transformation of the economy of the region into one based on medicine, research and technology. By integrating 20 hospitals, 400 doctors’ offices and outpatient sites, long-term care facilities and a major insurance plan, UPMC has advanced the quality and efficiency of health care and developed internationally renowned programs in transplantation, cancer, neurosurgery, psychiatry, orthopaedics and sports medicine, among others. UPMC is commercializing its medical and technological expertise by nurturing new companies, developing strategic business relationships with some of the world’s leading multinational corporations and expanding into international markets, including Italy, Ireland, the United Kingdom and Qatar. For more information about UPMC, visit our website at