The Pittsburgh-based payer-provider achieved nearly $18.8 billion in revenues last year but saw its net income slip to $570 million.
Highmark Health posted revenues totalling nearly $18.8 billion in 2018, an increase of more than $500 million year-over-year, though its net income fell by almost as much, according to the company's earnings report released Tuesday morning.
Despite more than $50 million of growth in its diversified business offerings and continued success with Allegheny Health Network, Highmark's excess of revenue over expenses dropped precipitously in 2018.
The Pittsburgh-based payer-provider reported a net income of $570 million, down from just over $1 billion in 2017, along with an operating gain of $526 million, down $90 million year-over-year.
Related: Highmark Health Achieves $9.4B in Revenues For First Half 2018
Highmark's health plans' operating revenues also suffered declines compared to 2017, with the government business dropping by $126 million and the commercial business falling by $114 million. This is despite stable health plan membership metrics, with 4.5 million members in Pennsylvania and Highmark reporting a "more stabilized risk pool" among its ACA business.
C-suite perspective:
“We’ve made much progress in building a strong enterprise since we formed Highmark Health six years ago, as reflected in our strong 2018 financial performance improvements across all of our business units – the second highest results in company history, surpassed only by the record results we reported in 2017," David Holmberg, CEO of Highmark Health, said in a statement. “We’ve delivered on our promise to build a better, integrated health coverage and care system to meet consumer demand. People are staying with us and moving to us and, as a result, we believe we continue to be very well-positioned for the long term, and remain on course to getting health care right for our customers, members and patients.”
Highmark's net assets also slipped down from $6.9 billion as of June 30 to $6.7 billion as of December 31.
On the positive side, Allegheny Health Network (AHN) continues to serve as a valuable asset for Highmark, providing operating revenues of $39 million, a $10 million increase compared to 2017. Highmark stated that its investments in AHN reached $350 million in 2018.
The subsidiary also experienced an 11% increase in ambulatory surgery center cases along with $3.3 billion in total operating revenues, a 7% increase year-over-year.
During the earnings call, Holmberg spoke about Highmark's recent business activity, including the partnership with Geisinger Health to establish a nonprofit organization in northeastern Pennsylvania.
Holmberg also expressed his support for Pennsylvania Attorney General Josh Shapiro's recent decision to modify a five-year consent decree between the University of Pittsburgh Medical Center (UPMC) and Highmark. He said the move is consistent with Highmark's desire for a level playing field to foster competition, sustainability, and abundant choices for consumers in the marketplace.
Related: Highmark and UPMC Continue to Battle
When asked by HealthLeaders during the company's earnings call, Karen Hanlon, CFO of Highmark, said that leadership remains confident in ACA rates for 2019, emphasizing a need for the organization to be both competitive and financially prudent.
Highmark Inc. President Deborah Rice-Johnson added that the organization plans to continue its efforts to reinvest in its members and believes in its able to reduce rates across ACA markets.
Holmberg said that Highmark has acted purposefully in its government business strategy, staying financially disciplined while putting tools in place to navigate whatever changes affecting the ACA may arise from Capitol Hill or the federal courts.
He added that Highmark's current financial standing puts the organization in a stable place ahead of potential changes to the ACA, just as the Department of Justice dropped its partial defense of the landmark healthcare law late Monday night.
Below are additional highlights from Highmark's first-half earnings report:
- Highmark Health paid $432 million in taxes last year.
- HM Health Solutions, an IT subsidiary, achieved revenues north of $900 million.
Complete information is available in Highmark's official press release.
Editor's note: This article has been updated to include notes from Highmark's earnings call.
Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.
KEY TAKEAWAYS
Highmark Health originally scheduled its earnings report for March 18 but postponed it by eight days.
Subsidiary Allegheny Health Network achieved total operating revenues of $3.3 billion.
Highmark's health plans took a hit, with both commercial and government business operating revenues falling by at least $114 million.