UPMC versus Highmark – Can UPMC Pop Champagne Corks?

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Original story posted on: May 8, 2019

The saga continues between UPMC hospitals and Highmark.

UPMC reported revenue of $5.1 billion in the quarter ending March 31, 2019, up 10 percent from the $4.6 billion reported in the first quarter of last year. At the same time, expenses rose by more than 11 percent. Since revenues are still larger than expenses for UPMC, this resulted in reported net income of $289 million, an increase over the $97 million reported for the first quarter of 2018.

Enrollment in UPMC health plans is up to 3.5 million members as of March 31, up 3 percent compared to the first three months of 2018.

So, what does all this mean?

Did the 3 percent increase drive a 10 percent increase in revenue, and does this mean they are winning their enrollment battle with Highmark? It is much more complicated than that. We also should consider that new accounting rules impact the reporting of revenue between these periods. 

I think the fact that UPMC Medicare Advantage (MA) enrollment is up almost 8 percent for the month of April 2019 over the month ending April 2018, based on Centers for Medicare & Medicaid Services (CMS) data, is a solid sign that UPMC is, in fact, winning.

Here are the Medicare Advantage enrollment totals for UPMC’s Medicare Advantage products in April of 2018 and 2019:

Medicare Advantage members generate larger premiums in terms of per-member, per-month revenue than other insurance products. They also are much more costly than the average plan, through which members may or may not use any services in a given period.

Having worked with MA plans, there is a general rule of thumb. 

The first three months, as premiums come in, you have parties and celebrate.  The second three months, as claims start to hit, you start doing projections. The third quarter, as you see claim payments start to meet premiums, you sober up. The last quarter, if claim payments overwhelm premiums, you start reaching out to old friends through LinkedIn.

In addition to claim payments, MA plans must work through “risk adjustment,” both quarterly and annually. Medicare pays MA plans a base amount per member that is adjusted based on their Hierarchical Condition Category, or HCC, scoring. That means they start out with a “per-member, per-month” figure that shifts as claims data are filed and each member’s risk score is adjusted.

UPMC, along with other MA plan providers, make sure they have systems to monitor risk scores and control costs as they grow. 

With health systems becoming insurance plans and plans buying providers, one thing is for sure. Data, infrastructure, and the will to manage based on that data will determine winners and losers.


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Disclaimer: Every reasonable effort was made to ensure the accuracy of this information at the time it was published. However, due to the nature of industry changes over time we cannot guarantee its validity after the year it was published.
Timothy Powell, CPA

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of both the RACmonitor and ICD10monitor editorial boards and a national correspondent for both Monitor Mondays and Talk Ten Tuesdays.

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