Highmark Health sustained positive financial growth during 2016, delivering a strong year-end performance while maintaining our national customer base of approximately 50 million. The primary drivers were substantial improvement in the health plan results — specifically the Affordable Care Act (ACA) and senior segments — as well as continued strong performance in the commercial insurance business and our diversified businesses. Operating revenue for the year ending December 31, 2016, was $18.2 billion, an increase of 3 percent over the prior year driven by higher patient volumes at Allegheny Health Network, growth in Medicaid business, and the first full year of northeastern Pennsylvania operations at the Health Plan. Highmark Health also reported an excess of revenue over expenses of $59 million, an improvement of $144 million over the prior year. Pre-tax results of $168 million were $245 million ahead of the prior year driven by significant improvement in the Health Plan that was partially offset by non-recurring prior year items. Highmark Health continues to be a financially strong company, maintaining $6.5 billion in cash and investments and net assets of $5.2 billion. This stability allowed us to invest $450 million in our core and growing businesses during 2016 to improve health care quality and access for our members and to create an outstanding customer experience.
Highmark Health Plans
The Health Plan business reported an operating gain of $242 million for the period ended December 31, 2016, an improvement of $680 million over the prior year. These gains were the result of performance improvements across all the health plan segments, most notably the government business — which includes Small Group, Medicare, Medicaid and the ACA programs — which delivered an improvement of more than $630 million over the prior year and an increase in the commercial business of nearly $45 million. 2016 ACA losses through December 31 totaled more than $180 million.
The Health Plan also maintained strong membership throughout all its service areas, with 96 percent member retention in the commercial business and overall member retention of 94 percent. Highmark remains the fourth-largest capitalized Blue Plan in the country, with nearly 5 million core medical health plan members in Pennsylvania. It is also the largest commercial medical health plan in Pennsylvania, with 4.2 million members, representing a market share of 44.9 percent. In the 29-county western Pennsylvania market, we have nearly 7 million customers through our health insurance plans, dental and vision programs, and stop-loss coverage. In our core medical health insurance plans in the 29-county market, we have 2.5 million members. In the commercial market segment, our western Pennsylvania market share of 55 percent is more than double that of our next largest competitor, as confirmed by 2016 year-end data from Decision Resources Group. Highmark's Medicare Advantage plan remains the largest and highest-rated Medicare Advantage program in Pennsylvania, with 4.5 Stars.
Allegheny Health Network
2016 was another year of growth and investment for Allegheny Health, recording an operating loss of $39 million, slightly behind prior year performance. The loss was driven by costs associated with the implementation of the integrated electronic health record (EHR) system and investments in physicians and key support staff. However, these costs were partially offset by higher volumes, with particular growth in oncology services. Allegheny Health Network showed positive patient volume trends year-over-year in 2016, with inpatient discharges, outpatient registrations, emergency room admissions, and surgical cases exceeding previous year results. While many hospitals in western Pennsylvania experienced flat or decreasing volumes, Allegheny Health Network saw a 1.2 percent increase in both inpatient and outpatient registrations. With the increase in volumes year over year, Allegheny Health Network has delivered a 30 percent increase in net patient service revenue since it was established in 2013. To complement this increase in revenues, there has also been continued growth in EBITDA to 4.0 percent in 2016.
These improved results were achieved even after capital investments of $175 million were made in the network's facilities, physician organization, and technology, including the EPIC platform, through December 31, 2016.
Vision, Dental, and Health Risk Solutions Businesses
Following near record performance in 2015, Highmark Inc.'s vision, dental, and health risk solutions businesses reported combined earnings of $163 million in 2016, trailing last year by $53 million. United Concordia Dental continued to focus on growth in 2016 and delivered positive results, contributing $45 million in operating profits, a $13 million improvement from the prior year. HM Insurance Group, the stop loss business, delivered operating gains of $39 million in 2016. HVHC Inc., the vision company, delivered revenues of approximately $1.6 billion and an operating gain of $79 million in 2016 and continued the planned expansion of Visionworks' retail presence, opening 53 new stores in 2016 in key markets such as Columbus, Ohio, and Seattle, Washington, bringing the current location total to nearly 750. Davis Vision, the managed care component of HVHC, also continued to grow the top line with operating revenues of nearly $780 million and year-over-year network growth of 18 percent in 2016. The company also had a 97 percent client retention rate, which, when combined with new business growth, enabled it to surpass 2015 membership projections, now totaling more than 22 million.
HM Health Solutions
HM Health Solutions experienced significant growth across many dimensions of its business in 2016. The company has 9.7 million customers served on the IT platform, an increase of 18 percent from 2015, and revenues have risen 34 percent from 2015 to $720 million. While operating gains of $4 million lagged behind the prior year due to continued investment in the development of the company's technology platforms, HM Health Solutions also saw growth through the acquisition of Incepture Print Solutions, the fulfillment business previously owned by Guidewell. This acquisition is part of the company's overall strategy to expand services to existing and prospective health plan clients.
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