At UPMC, the money kept coming in, even when the patients didn’t

A sharp drop in traditional hospital services did not keep the Pittsburgh region’s healthcare colossus from growing.

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UPMC Mercy Hospital in Uptown, where the medical center is expanding. (Photo by Jay Manning/ PublicSource)

UPMC Mercy Hospital in Uptown, where the medical center is expanding. (Photo by Jay Manning/ PublicSource)

Surgeries, emergency room visits and inpatient admissions plunged at UPMC’s Western Pennsylvania facilities during the healthcare giant’s most recent fiscal year, but its wealth continued to grow.

This month, UPMC released annual disclosures to the Internal Revenue Service, which requires that tax-exempt institutions detail their finances. Those disclosures, covering a fiscal year ending on June 30, 2020, are a snapshot of UPMC’s finances as they stood roughly four months into the COVID-19 pandemic.

The disclosures came amid a Democratic mayoral primary in which UPMC’s tax-exempt status was an issue. Democratic nominee Ed Gainey ran on a platform of getting more revenue from UPMC, often criticizing incumbent Bill Peduto for his 2014 decision to drop a lawsuit challenging its tax exemption.

According to the disclosures covering UPMC’s Western Pennsylvania operations, and its parent organization, in the fiscal year ending June 30 the system:

  • performed 101,759 surgeries — down from 178,374 in the prior fiscal year
  • served 341,694 ER visits, down even more steeply, from 750,914
  • admitted 121,171 inpatients for a total of 778,907 days, both down around 40%.

Still, UPMC added nearly $800 million to its gross receipts (which reflect all money received before subtracting expenses), putting the Downtown-based parent company and 55 Western Pennsylvania subsidiaries above $20 billion in revenue for the first time.

In response to PublicSource’s questions, UPMC Vice President for Financial Reporting Susan Manko wrote that much of the decline in traditional hospital services was driven by government requests, early in the pandemic, that hospitals postpone many types of surgeries. She wrote that patient volumes began to rebound in June and climbed through the second half of 2020.

Telemedicine revenue may have picked up some of the slack. Telemedicine appointments soared, from around 250 per day to around 15,000 per day in the spring of 2020, according to the disclosures, which did not break out the revenue from those services.

Clear from the disclosures: Federal generosity helped to keep UPMC out of the red.

The difference between UPMC's Western Pennsylvania revenues and expenses was just shy of $13 million – much narrower than the nine-figure margins of some recent years. Had government grants not increased tenfold to $192 million, UPMC may not have broken even.

Those grants reflect part of $460 million in federal CARES Act funding received by UPMC, which helped to place the health system among the top 30 members of its industry in receipts of COVID-19-related aid from Washington.

Despite its thin margin, UPMC's assets grew smartly, to $20.8 billion. The gain is due mainly to an accumulation of savings and temporary cash investments, which rose to around $2.6 billion versus just $32 million the year prior. The surging savings was made up mostly of money UPMC borrowed to prepare for potential contingencies in the early, uncertain months of the pandemic. It has since paid off some of that debt, shifted some money to capital projects, and used some to expand into Western Maryland.

Though hiring slowed, UPMC continued to claim the title of biggest non-governmental employer in Pennsylvania. The roster inched up by nearly 1,000 people, to 66,202.

Wages for non-medical staff at UPMC continue to be an issue, following the medical center’s 2016 pledge to raise all starting wages to $15 or above.

Both average compensation of employees and CEO Jeff Romoff's pay rose by nearly 6%. That put Romoff at nearly $9.5 million in pay and benefits, or 115 times the average employee pay of $82,069.

Besides Romoff, seven UPMC employees earned more than $2.5 million each, in some cases including benefits and payments from organizations related to the health system.

UPMC’s disclosures – as they have in past years – emphasized the health system’s charitable activities. Among many other examples, the filings list:

  • $892 million spent covering payment shortfalls for patients enrolled in Medicare
  • $553 million in contributions to more than 3,000 community health improvement programs and subsidized services, often geared toward vulnerable populations
  • $509 million in financial assistance to patients of limited means.

While just over half of its real estate is tax exempt, UPMC disclosed $167 million in taxes to the state, counties and municipalities. Manko wrote that the health system’s total annual tax bill to all federal, state and local entities was $919 million, of which $46 million went to local governments.

UPMC’s vast and international extended family has many arms that make no claims to being charities. The disclosures list 99 taxable organizations in which UPMC has a stake or interest, including Shanghai UPMC, UPMC Italy Health Services and others in Ireland, Canada, the United Kingdom and the Cayman Islands.

Rich Lord is PublicSource’s economic development reporter. He can be reached at rich@publicsource.org or on Twitter @richelord.

Develop PGH has been made possible with funding from The Heinz Endowments.

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