Highmark CEO: Covid-19 pandemic has not deterred growth across Pa., neighboring states

Despite recent plunges in hospital revenues statewide, the covid-19 pandemic has not thwarted Highmark Health from strengthening its overall financial position and increasing its reach across Pennsylvania and neighboring states, Highmark CEO David Holmberg said Thursday.

“We believe that we are very well-positioned for the long term,” Holmberg told reporters on a conference call to discuss the nonprofit health system’s latest financial report. “Our mid-year 2020 financial results are solid, and they have helped us to maintain the momentum that we have built over the last three years. … We’ve continued to execute on, and in some areas, accelerated, key aspects of our strategy.”

Highmark took in nearly $9 billion in total revenue in the first six months of 2020, about $200 million less than last year, the system reports.

But by some metrics, the system as a whole — including its hospital provider, insurance and other business arms — is on track to perform nearly as well or better than it did financially last year, the system’s self-reported figures show.

Operating gain through the first half of this year totaled $590 million. That’s 43% higher than the $410 million by the same time last year, and 17% higher than the gain reported this time two years ago, data show. Operating gain reflects the amount left after subtracting operating-related expenses.

Increased revenue in the system’s insurance and dental businesses helped offset the losses in hospital and other provider-based revenue during March and April, data show. That’s when the statewide lockdown postponed non-emergency procedures and resulted in steep drops in all types of visits.

About $7 billion comes from its insurance business and the remaining $2 billion from its health care provider arm.

“Having a diversified portfolio, both in terms of the products that we have and also our geography,” Holmberg said, “also has enabled us to be responsive in the community and do what we’re supposed to do, which is stay in front of a pandemic and defend the region.”

Government aid helped, too.

To free up cash, the nonprofit system received at least $300 million in federal aid: $232 million in advance payments of Medicare funding that must be repaid, and $68 million in grant money through the Coronavirus Aid, Relief and Economic Security Act. It also received approval to defer payroll taxes, saving about $6.4 million a month.

Bouncing back from lockdown

The pandemic and ensuing statewide lockdown required constant pivoting and communication among thousands of doctors and clinicians, the speedy ramp-up of telemedicine and new investments in equipment, technology and public and private collaborations, Holmberg said.

Telehealth appointments surged, from just 50 a day prior to the
pandemic to a peak of 4,000 per day, executives report. Virtual medical visits have settled at about 2,000 daily, and officials anticipate that such programs will continue to be used more regularly once the pandemic subsides.

In May, Highmark’s Allegheny Health Network announced it was laying off about 250 employees in response to covid-19 and a need to “realign” operations, in addition to another 130 jobs at its IT business as part of a planned restructuring. The positions eliminated included corporate and administrative services “and had no impact on AHN’s hospital-based front-line caregivers,” spokeswoman Lynn Seay said.

After 11 straight quarters of earnings, Allegheny Health Network took an operating loss of $116 million through June 30. That’s a $136 million decrease from the prior year. Officials attributed that to patient volumes plummeting by as much as 50% during the pandemic-spurred lockdown.

But major initiatives and construction projects pressed on.

The $78 million AHN Cancer Institute opened at AHN’s flagship Allegheny General Hospital in Pittsburgh’s North Side. Three neighborhood hospitals are up and running as of this year: AHN Brentwood opened in March, AHN Hempfield was completed in January and AHN opened a mini-hospital in McCandless in December.

Another 24-hour “mini-hospital” is set to open in Harmar next month.

“As expected, Allegheny Health Network, our health care provider system, was negatively impacted by the pandemic,” Holmberg said . “However, inpatient volumes have now returned to pre-covid levels.”

RELATED: Covid-19 lockdown costs Allegheny Health Network hospitals $160M in revenue; system gets $300M in federal aid

The system’s latest covid-19 positivity test rate was at about 6.9%, with 35 patients currently hospitalized. That includes 26 who are in an intensive care unit and 13 who are on ventilators. That’s down from the 60 or more patients in the hospital at a time in mid-July, when closer to half were on ventilators.

Insurance gains offset losses on hospital side

Meanwhile, “during the first six months of the year, the Highmark health (insurance) plan performed well, with our core businesses remaining strong, keeping premium rates competitive and achieving commercial member retention of 98%,” Holmberg said. “Our affiliated businesses also contributed to our overall solid performance.”

The system boasts of being the largest insurer across all of Pennsylvania, West Virgnia and Delaware , including 5.1 million in Western Pennsylvania. It includes its insurance plans and partner Gateway Health.

Highmark’s net assets have climbed to more than $8.2 billion.

When asked if any more layoffs could be imminent, Seay said, “We are assessing the needs of our patients, members customers and communities served on a daily basis to ensure that we have all of the necessary capacity and resources available to meet those demands.”

“We will continue to be deliberate and resourceful in our workforce strategy during this challenging and uncertain time for our industry so that our operations across all business units remain strong and sustainable over both the near- and long-term,” Seay said.

Holmberg said the system is in the process of “transforming the health care industry” by “disrupting ourselves” and doing “what’s in our customers’ best interest, not ours.” He said among efforts he’ll be sharing more information about in the near future are using artificial intelligence and data “to reshape how we present, diagnose and treat” patients and creative ways to leverage public and private partnerships.

“We need to re-engage people in their health, eliminate the barriers and costs that get in the way and leverage technology as the key enabler,” Holmberg said. “We’ll be providing more details about how we plan to go about this in the months ahead.”

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, nlindstrom@triblive.com or via Twitter .

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