Growing Patient Volumes Drive Strong First Quarter Results for UPMC

With strong growth in patient volumes and Insurance Services membership, the University of Pittsburgh Medical Center (UPMC) today reported total revenues of $1.73 billion for the first quarter ended Sept. 30, 2007, up 14 percent from the year-ago period. Net income, which includes investment income, rose by $28 million to $93 million due to an accounting change.

“Our internationally renowned care continues to attract growing numbers of patients, both in our hospitals and outpatient settings,” said UPMC Chief Financial Officer and Senior Vice President Robert DeMichiei. “Our solid operating income and strong cash flow enable us to consistently reinvest in world-class clinicians, facilities and technology.”

Operating income for the first quarter was $62 million compared to $65 million in the year-ago period. Continued pressure on commercial premiums reduced operating income in the Insurance Services Division, more than offsetting increased volumes and operating income in Provider Services, which includes hospitals, physician practices and other clinical capabilities. Insurance Services membership rose to 1.2 million with growth in Medicare and Medicaid behavioral health contracts.

Key measurements highlight strong results in UPMC’s core health care business, Mr. DeMichiei noted. Inpatient activity at UPMC hospitals in the period, as measured by medical-surgical admissions, was up 1 percent. Outpatient activity grew 5 percent. Physician activity, measured by average revenue per weekday, rose 11 percent from the year-ago period.

Cash flow from operating activities declined to $75 million from $87 million in the quarter, due mainly to an increase in pension plan funding. UPMC contributed $42 million to its defined benefit pension plan during the quarter. “The consistent strength of our financial results has allowed us to put our pension obligation to our employees on very solid footing,” Mr. DeMichiei said.

UPMC also is continuing to invest in advanced technologies and facilities, including the new Children’s Hospital and research complex in the Lawrenceville section of Pittsburgh. Capital spending in the first quarter totaled $106 million, including $49 million for the Children’s construction.

Investment income of $32 million, up from $1 million in the prior year, reflects a change in accounting for investments. If the same accounting treatment had been used in both periods, investment income would have been essentially flat.