Highmark Health sees $1B gain
CEO cites firm’s ‘game changers’
In reporting a $1 billion gain in profitability for Highmark Health in 2017, president and CEO David Holmberg on Monday cited two “game changers” for his company last year, both coming near summer’s end.
First, there was the late July easing of requirements for Highmark to seek Pennsylvania Insurance Department approval before making significant investments in its burgeoning Allegheny Health Network.
Then in August, Highmark Health announced it was selling a majority stake in its Davis Vision insurance business to the private investment management firm Centerbridge Partners, L.P.
The deal, which closed in December, added $300 million to Highmark Health’s coffers — another layer to the year’s financial report that saw a nearly 10-fold operating gain, from $62 million in 2016 to $616 million last year.
As far as Highmark Health’s future, though, that one-time gain will be dwarfed by the insurance department’s lifting of reporting requirements — a move Mr. Holmberg sees as an affirmation of the strategy that “levels the playing field” with the competition as the company builds its own integrated deliverysystem.
How much difference did that make? Mr. Holmberg cited as “a perfect example” its December agreement with Penn State Health, including Hershey Medical Center, to invest more than $1 billion over five years to establish a community-based health care network in central Pennsylvania.
Had the state required its approval first, the deal — and perhaps others still to come — could have been bogged down in delays and any number of other complications.
“We are believers in partnerships,” he said, pointing also to its collaboration with the Johns Hopkins Sidney Kimmel Cancer Center in Baltimore. “We’re not empire builders. Our focus is bringing care intothe community.”
The strategy appears to be paying off, given the 2017 financial gains described by CFO Karen Hanlon as “a watershed year.”
Big revenue gains came when the company’s government business — such as Medicare, Medicaid and the Affordable Care Act marketplace plans — recorded a $433 million profit, up from $22 million the year prior. Much of that was due to a retrenchment in Highmark’s Affordable Care Act marketplace plans, limiting its exposure and adjusting premiums up to cover its costs.
The commercial insurance business also thrived, with $317 million in operating revenue, a near $100 million gain.
Highmark Health’s Allegheny Health Network provider arm also showed a $31 million profit, following a $33 million operating loss in 2016 — a gain that officials attributed to stable hospital volume and high patient acuity, as well as operational efficiencies.
Even before the year-end results were released Monday, ratings agencies had taken note of the health giant’s progress.
Earlier this month, Standard & Poor upgraded Highmark Inc. from A- to A with a stable outlook, with the ratings agency saying it expects the company “will maintain its operating performance and market positions” in its health plan, diversified business segment and the AlleghenyHealth Network.