UPMC versus Highmark – Can UPMC Pop Champagne Corks?

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.

Programming Note:

Listen to Tim Powell today and every Tuesday on Talk Ten Tuesday, 10-10:30 a.m. ET

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.

Related Stories

  • National Coding Contest Raises Serious Industry Questions
    Contest indicates coding accuracy is below expectations. Central Learning is a web-based coding assessment and education application. Since 2016, the company has conducted an annual national coding contest to measure ICD-10 coding accuracy and production. The initial premise was to…
  • CMS Proposed Rules Will Impact SNFs and Hospice Providers
    Proposed rules also include new payment models. The Centers for Medicare & Medicaid Services (CMS) has been quite busy these last few weeks issuing the proposed payment rules for 2020 and making some other announcements.  Here is an update on…
  • Good News in FY 2020 Inpatient Prospective Payment System Proposed Rule
    The FY 2020 IPPS proposed changes could bode well for many facilities. There has been much discussion about the Centers for Medicare and Medicaid (CMS) Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2020 proposed rule and its suggested…