Becker's Hospital Review

54 CFO / FINANCE UPMC sees net income dip 69% as operating margin improves By Ayla Ellison P ittsburgh-based UPMC reported higher revenues and operating in- come in the first half of 2018, but saw a significant drop in net income. Here are five things to know: 1. UPMC reported revenues of $9.3 billion in the first six months of this year, up from $7.5 billion in the same period a year earlier. The boost was largely attributable to patient volume growth and higher enrollment in the system's health insurance plan. As of June 30, UPMC's health plan had more than 3.4 million members. 2. After factoring in expenses, UPMC ended the first half of 2018 with op- erating income of $176 million, up from $135 million in the same period of 2017. 3. The system reported a 1.9 percent operating margin for the six-month period, up from a 1.8 percent margin in the same period a year earlier. 4. UPMC reported a $41.4 million loss on its investment portfolio in the first half of this year. That's compared to a $269.6 million gain on its investments in the first six months of 2017. 5. UPMC ended the first half of 2018 with net income of $115.7 million, down 69 percent from $375.7 million in the same period of the year prior. n IU Health sees operating income jump 48% in first half of 2018 By Ayla Ellison I ndianapolis-based Indiana University Health reported a year-over-year increase in revenue and operating income in the first half of 2018. IU Health recorded operating revenue of $3.1 billion in the six months ended June 30, up 4 percent from $3 billion in the same period of the year prior. The boost was attributable to annual rate increases and increased inpatient volumes. When excluding state disproportionate share revenue and other factors, the system saw patient service revenue increase year over year by 5.8 percent in the first half of 2018, according to bondholder documents released in August. The system's expenses grew to $2.8 billion in the six-month period ended June 30, up 1 percent from the same period of the year prior. The increase was driven by a 6 percent year-over-year increase in labor costs, and a 6.5 percent increase in supplies costs. IU Health ended the first half of this year with operating income of $279.1 million, up 48 percent from $188.2 million in the same period of 2017. When adjusted for one-time transactions or significant items relating to pri- or years, IU Health's operating income climbed 69 percent year over year. After factoring in nonoperating income, the system reported net income of $300.3 million in the first six months of 2018, down from $356.1 million in the same period a year earlier. n Hospitals are investing in housing — Here's why By Morgan Haefner S everal factors, including changes in reim- bursement, have motivated some hospitals to invest in community housing projects, according to NPR. In the 1990s, 50 percent of the children in South- ern Orchards — near Columbus, Ohio-based Na- tionwide Children's Hospital — lived in poverty. rough a partnership called the Healthy Neigh- borhoods Healthy Families initiative, Columbus community groups like United Way and Nationwide Children's began to invest in the neighborhood's homes. In 2008, the organizations started renovat- ing vacant homes for resale, building affordable housing and funding renovations for homeowners. With a $6.6 million infusion from Nationwide Children's, the $22 million project led to the con- struction of 58 affordable housing units, 71 renovat- ed homes and 15 new homes. e organizations also gave out 149 home improvement grants from 2008 to 2018, according to the report, which cites Pediatrics. Kelly Kelleher, MD, director of the Center for Innovation in Pediatric Practice at Nationwide Children's, writes in Pediatrics that Nationwide Children's is treating "the neighborhood as a pa- tient." e hospital is attempting to mend harm- ful socio-economic and physical environments in the hope it will lower the prevalence of health issues caused by those conditions. e investment could pay for itself if the number of hospital visits from South- ern Orchards neighborhood falls, said Dr. Kelleher. Hospitals across the country are taking similar ap- proaches, though not as direct as owning and op- erating housing in a certain neighborhood, accord- ing to Megan Sandel, MD, who helps direct Boston Medical Center's housing initiative. Dr. Sandel said Boston Medical Center's projects are owned and operated by other community organizations. Sim- ilar projects are off the ground in Seattle, Boston, Atlanta and New York, among other places. A potential motivator for these projects is a shi from fee-for-service medicine to reimbursement based on improving quality of care, according to the report. Some states are even starting to give health- care organizations funding to manage populations. n

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