UPMC shakes off virus chill to finish 2020 with $1B
Nonprofit’s revenue more than doubles
Health care giant UPMC shook off a virus that rampaged through the U.S. in 2020 to end the year with $1 billion after expenses.
The health insurance and hospital system Friday reported excess revenue of $1.07 billion for 2020 — called “profit” in forprofit accounting — up more than double from $420 million in 2019. Revenue from core medical and insurance services rose 12% to $23.0 billion from $20.6 billion for the calendar year, while operating income was also up sharply to $836 million from $239 million in 2019.
UPMC’s operating margin, including income tax and interest expense, rose to 2.8% for the year,
up from 0.4% in 2019.
“As a leading integrated provider and insurer, we are well-positioned to weather the storm, both operationally and financially,” Chief Financial Officer
Edward Karlovich said in a statement.
UPMC health insurance services were credited with pushing the system forward with $9.8 billion in enrollment revenue as patient admissions were off 10% in 2020 due to government-imposed restrictions to curb spread of the coronavirus. Including insurance services’ Work Partners and Life Solutions, behavioral health and ancillary programs, UPMC insurance enrollment rose 11% to nearly 4 million members as of Jan. 21, which compared to 3.7 million members at the start of 2020.
Moreover, UPMC Insurance Services, like other insurers, paid less for medical claims in 2020 due to the shutdown of businesses and nonemergency medical procedures during the year as patients canceled appointments for care. UPMC’s medical loss ratio — the amount paid for claims during 2020 — fell to 86.4 cents of every revenue dollar from a high of 89.3 cents of revenue dollar in March.
President Joe Biden signed an executive order Wednesday, directing federal agencies to make an intensive study of potential vulnerabilities in the industrial supply chain for such important inputs as rare-earth metals and certain pharmaceuticals. Mr. Biden has in mind a two-phase program; the first phase, lasting 100 days, would produce a report on four key categories of products; the second phase, lasting a year, would examine whole industrial sectors, from defense to energy to transportation. The integration of the U.S. economy into an ever-widening system of globally traded raw materials, intermediate goods and finished products has been going on for decades, but the coronavirus crisis has triggered sudden shortages of medical equipment and, most recently, semiconductors, making supply-chain security a new priority for business and government.
The federal government should spearhead fact-finding, as Biden has just ordered. It’s never a good idea to solve a problem before you know exactly what it is, yet a September 2020 Congressional Research Service report on medical supply chains noted that “a lack of critical official data and information has impeded U.S. policymakers’ ability to assess the size and composition of the U.S. market for specific products, and the overall production capacity of U.S.-based producers to satisfy various essential national needs.”
The lack of clarity may extend more widely than that. The U.S. auto industry has had to slow production recently due to a shortage of semiconductors, triggering bipartisan concern on Capitol Hill, which in turn prompted Mr. Biden’s order. However, the shortage of chips is not a uniquely American problem. It is global, affecting all automakers in all countries, and seems to be the unintended consequence of their decision last year — reasonable at the time — to cut chip orders in anticipation of declining sales due to the coronavirus-related economic slump. Chip producers diverted supply to consumer electronics, then car demand exceeded forecasts.
Fortunately, a top General Motors official has announced that the worst issues should be over soon at his company. When this accidental shortage ends, and the time comes for policymaking, the United States must avoid the temptation to turn “national security” into an excuse for protectionism. Various U.S. companies and their lobbyists already are encouraging this tendency in pursuit of federal subsidies and other support. No doubt government must help secure U.S. supply chains, especially in critical materials such as rare earths or lithium, both crucial to battery production, among other uses. Dependency on supplies from adversarial-countries such as China presents more challenges, strategically, than buying from friends and allies such as Taiwan, South Korea, Mexico, Canada or Europe, however.
This crucial distinction is precisely the one that President Donald Trump denied in pursuit of his “America First” doctrine, which lumped all U.S. trade partners together as alleged exploiters of our purportedly weak politicians. The Washington Post expects Mr. Biden’s review to reaffirm the more nuanced reality: Mutually beneficial exchange among countries, conducted freely within a legal framework, is the path to maximum security, economic and strategic. Autarky, by contrast, is a dead end.