The University of Pittsburgh Medical Center on Friday reported solid operating gains and a healthy rise in admissions for the first three months of the fiscal year.
Just one day after it confirmed the layoffs of 500 workers, the health giant reported income from patient operations of $63 million from July through September, a slight improvement over the same period a year ago.
UPMC Chief Financial Officer Robert DeMichiei said the layoffs are a way of "addressing our cost structure to get ready for what we see is a worsening economy."
"Even though the results are strong now, we need to ensure they stay strong six months from now, a year from now, because we are committed to keeping a financially strong and viable organization," DeMichiei said in a meeting at UPMC headquarters, Downtown.
The layoffs have been concentrated in nonclinical, administrative jobs, DeMichiei said. Fewer than 50 clinical workers have been laid off, he said.
It isn't known if more layoffs will be forthcoming, but officials said other cost-cutting measures may include cuts to advertising and travel budgets.
DeMichiei invoked the wars in Iraq and Afghanistan and the stock market turmoil as examples of why UPMC next year expects cuts in its federal reimbursement. That could be a significant reduction in reimbursement because about 60 percent of UPMC's revenue comes from the federal Centers for Medicare and Medicaid Services, he said.
Job cuts in other industries can have an impact on health care providers such as UPMC because they may be forced to care for more uninsured patients, he said.
"Our economy is worse, and it's going to be much worse in the years ahead," DeMichiei said.
Indeed, the battered market has affected UPMC's sizable investment portfolio, which dropped to $2.8 billion during the first quarter, from $3.1 billion reported in fiscal year 2008.
"It's a big number but not a number that we're not anticipating," said UPMC Treasurer and Senior Vice President Talbot Heppenstall Jr.
The investment money in the bank is not used for day-to-day operations, Heppenstall said.
Officials expressed optimism about the coming year, based on a key measure of financial stability known as EBIDA, which stands for earnings before interest, depreciation and amortization. UPMC during the quarter realized $149 million in EBIDA, described by officials as the money used to run the business and fund capital expenditures. UPMC is on target to exceed $500 million in EBIDA by the end of the fiscal year.
Overall, operating revenue during the first quarter grew by 16 percent to $1.9 billion.
Officials yesterday reported a 11 percent increase in admissions across the network's 21 hospitals, to 47,470 from 42,724 during the same three-month period a year before. Most of the increase was attributed to the acquisition of UPMC Mercy, but even without Mercy, admissions would have shot up, officials said.
Other indicators of growth included a 6 percent jump in the number of employed physicians to 2,621 from 2,453, and a 7 percent jump in membership in the UPMC Health Plan, to 1,297,288 from 1,205,788.
UPMC is maintaining its "AA" credit rating, which officials said is another indicator of financial strength.
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