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UPMC reports increased operating loss compared to same period last year

UPMC Passavant-Cranberry is located at 1 St. Francis Way, in Cranberry Township. Butler Eagle File Photo

UPMC cites more people seeking medical care and rising pharmacy costs as reasons for its $371 million operating loss for the first nine months of the year, according to a financial and operating report issued Wednesday, Nov. 27.

The latest operating loss for the Pittsburgh-based hospital system is more significant than the $177 million loss reported over the same period last year and comes in spite of an increase in operating revenue for that span. Operating revenue for the nine-month period ending Sept. 20 was $22.2 billion compared to $20.6 billion in the same nine months of 2023.

The report for one of the largest nonprofit health care systems in the United States shows that before restructuring costs — sustained with an April layoff of 1,000 employees — the operating loss would have been $262 million for the period ending Sept. 30.

The operating loss, the report says, is “primarily attributable” to elevated medical usage and pharmacy costs, including the price of Glucagon-like peptide 1 (GLP-1) drugs that are exceeding revenue rate increases. Cleveland Clinic defines GLP-1 drugs as those that help lower blood sugar and promote weight loss; the drug is often used to treat diabetes.

“Additionally, UPMC booked a $115 million premium deficiency reserve (PDR) in the third quarter in the insurance services division,” the report said. “This non-cash expense reflects management’s anticipated losses for the remainder of the contract period, which ends Dec. 31, 2024.”

The increase in operating income is described as improved patient volumes, a decrease in contract labor expenses and the recognition of $235 million in revenue from FEMA reimbursement of COVID-19 related expenses.

“UPMC continues to have a long-term prospective in regard to its investment activities,” the report said.

UPMC has more than 40 hospitals and 800 clinical locations. UPMC’s presence in Butler County includes UPMC Passavant-Cranberry Hospital in Cranberry Township.

The system is based in Pittsburgh and primarily serves residents in Pennsylvania, New York and Maryland with hospitals, physician and homecare services, behavioral health insurance offerings and more.

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