PITTSBURGH (March 17, 2017) — Highmark Health today announced financial results and performance during 2016, reporting operating revenues of $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 prior year. Pre-tax results of $168 million were $245 million ahead of 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.
"Highmark Health sustained the progress we reported at mid-year, delivering a strong year-end operating performance driven by substantial improvement in the Highmark health plans results and continued strong margins in the diversified businesses while maintaining our national customer base of nearly 50 million," added Karen Hanlon, Executive Vice President and Chief Financial Officer. "Allegheny Health Network has made tremendous progress in strengthening its financial position and operations in a short period of time, reducing annual losses from almost $200 million at the time of the affiliation in 2013 to $39 million in 2016, while growing revenues by 30 percent to $2.9 billion."
The Health Plan business reported an operating gain of $242 million for the period ended December 31, 2016, an improvement of $680 million over prior year. These gains were the result of performance improvements across all of 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 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 of 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.
Following near record performance in 2015, the Diversified 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 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 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.
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.
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 revenues of $4M lagged 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.
Highmark Health paid taxes in 2016 totaling $326 million, which includes $176 million in federal, state, and local taxes, more than $9 million in property taxes in Pennsylvania, and an ACA health insurer provider tax of $141 million.
|(in millions)||Period ended December 31,|
|Allegheny Health Network||(39)||(36)|
|HM Health Solutions||4||7|
|Corporate & Other||(306)||(314)|
Operating gain (loss)
|Net investment income||167||295|
|Non-operating income (expense)||(3)||5|
|Net assets acquired of NEPA||||249|
|Excess (deficit) of revenue over expenses before income taxes||168||(77)|
|Income tax provision||109||8|
|Excess (deficit) of revenue over expenses||$59||$(85)|
Highmark Health, a Pittsburgh, PA based enterprise that employs more than 40,000 people nationwide and serves nearly 50 million Americans in all 50 states, is the second largest integrated health care delivery and financing network in the nation based on revenue. Highmark Health is the parent company of Highmark Inc., Allegheny Health Network, and HM Health Solutions. Highmark Inc. and its subsidiaries and affiliates provide health insurance to nearly 5 million members in Pennsylvania, West Virginia and Delaware as well as dental insurance, vision care and related health products through a national network of diversified businesses that include United Concordia Companies, HM Insurance Group, Davis Vision and Visionworks. Allegheny Health Network is the parent company of an integrated delivery network that includes eight hospitals, more than 2,800 affiliated physicians, ambulatory surgery centers, an employed physician organization, home and community-based health services, a research institute, a group purchasing organization, and health and wellness pavilions in western Pennsylvania. HM Health Solutions focuses on meeting the information technology platform and other business needs of the Highmark Health enterprise as well as unaffiliated health insurance plans by providing proven business processes, expert knowledge and integrated cloud-based platforms. To learn more, please visit www.highmarkhealth.org.