Dive Brief:
- Pittsburgh-based Highmark Health and its provider network Allegheny Health released financial results for the first nine months of 2023 on Wednesday, with Highmark’s insurance business boosting the financial performance of the company.
- Parent company Highmark Health — which operates insurance groups Highmark Health Plans, United Concordia Dental and HM Insurance Group — reported profit of $431 million on $20.3 billion in revenue for the period.
- Allegheny Health, which delivers care in western Pennsylvania, reported an operating loss of $144.2 million, up from a loss of $116.2 million for the comparable period last year.
Dive Insight:
Highmark Health formed in 2013 as a strategic affiliation between Highmark, which offers Blues-branded health insurance plans, and Allegheny Health Network. Collectively, Highmark and its subsidiaries and affiliates provide health insurance to 7 million members in Pennsylvania, West Virginia, Delaware and New York, as well as dental insurance.
In a release, Highmark Health attributed its financial performance to the success of its insurance business, adding that some of its units managed to overcome cost pressures driven by increased utilization patterns.
Highmark Health Plans posted an operating gain of $430 million during the first nine months of 2023. United Concordia Dental, which provides dental coverage, reported an operating gain of $74 million.
However, Allegheny Health sustained losses during the first nine months of the year. Loss from operations was $144.2 million compared to a loss of $116.2 million for the comparable 2022 period — a year-over-year decline of $28 million.
The health system said the loss was driven by one-time payments of $25.2 million and $91 million it received as part of American Rescue Plan funding in the second and third quarters of 2022, respectively.
Outside of relief funds, Allegheny’s operating expenses surpassed operating revenue, as the system felt continued inflationary pressures. CFO Carl Daley said on an investor call Wednesday that the health system “isn't immune to cost pressures other healthcare organizations are facing regarding persistent inflation and staffing challenges.”
Market and merit increases, supplemental payments and the utilization of physician contract labor pushed Allegheny’s salaries, wages and fringe benefits up nearly 3% year over year to total $1.9 billion. Patient care supply expenses, including drug prices, also increased alongside inflation. Operating expenses totaled $3.6 billion for the nine month period.
An increase in expenses offset a boost in patient volumes. Allegheny recorded a 5% increase in outpatient registrations, a 4% increase in physician visits and a 6% increase in emergency room visits across the network over the first nine months of 2023, according to the report. Operating revenue totaled $3.5 billion for the period.
Allegheny’s investment portfolio boosted results. The health system reported an investment income of $29.5 million for the period — an increase of $103.9 million from the prior year period.
