UPMC to get $1 billion in federal aid after hard hit from coronavirus pandemic

UPMC is slated to get more than $1 billion in aid from the federal government as Pennsylvania’s largest hospital system confronts volume plunging by 70% during the pandemic-spurred shutdown.

In the last two weeks of March, after the Wolf administration’s state shutdown began and thousands of elective procedures were halted, UPMC lost $150 million, financial disclosure documents released Friday show.

UPMC ended the first three months of this year with a $41 million total operating loss — compared to a $44 million operating gain by the same time last year.

The region’s other health care systems have reported sharp losses because of the coronavirus pandemic.

Excela Health officials last week reported a nearly $3 million profit for the year has turned into nearly $36 million in losses because of the pandemic, which limited its three Westmoreland County hospitals to providing only emergency care and treatment for covid-19 patients for about two months. Operating losses were more than $9 million, with an additional $28.3 million lost through investments.

Officials at Allegheny Health Network, which operates 12 hospitals in the region, announced last week that AHN and two affiliates are laying off about 380 employees, mostly as the result of the pandemic.

UPMC Chief Financial Officer Ed Karlovich said he expects losses to be greater during the second quarter, which will reflect revenue lost because of nonurgent procedures canceled in April and May.

With patient volume ramping back up as Gov. Tom Wolf eases restrictions, Karlovich expects the losses to be manageable.

“We are well-positioned to move this organization forward as we always have and support our communities,” Karlovich told reporters on a virtual news conference. “We’ll move forward, once this thing abates, full-speed ahead.”

The system received $255 million through the Coronavirus Aid, Relief and Economic Security Act, or CARES Act. That money will be used “to treat our patients and invest in our capital,” Karlovich said.

UPMC providers secured another $800 million in advance Medicare payments made available by the Department of Health and Human Services. Those funds must be repaid by April of next year.

Additionally, UPMC drew on $700 million of existing lines of credit and hundreds of millions more in bank-issued loans to ensure the system has enough cash to get through the pandemic. Those loans will be repaid by the end of the year, Karlovich said.

Leslie Davis, chief operating officer of UPMC Health Services Division, said that by the end of April, it became clear “the covid caseload did not reach the high levels that we had prepared for, fortunately.”

Just 2% of UPMC’s 5,500 total hospital beds — 110 — were used to treat covid-19 patients, Davis said.

“But our volume is coming back, and it’s coming back quickly,” Davis said. “Our doctors’ offices are rescheduling these procedures and assuring patients that our hospitals are safe while stressing the dangers of putting off care that is scheduled.”

As of two weeks ago, every patient at UPMC has been allowed to bring one support person into their rooms, with broader visitation still restricted.

Hospitals remain prepared with enough equipment and resources for possible second or third waves.

“We’ll be watching it (the pandemic’s impacts) very closely in the second quarter and into the third quarter,” Karlovich said. “I don’t think any of us know what the future holds with a potential resurgence.”

The nonprofit health system, which controls both provider and insurer arms, took in $20.6 billion in revenue in 2019 — $1.8 billion more than the previous year, year-end financial statements show.

Much of last year’s gains were attributed to 13% returns in the system’s $6.6 billion investment portfolio.

In the first three months of 2020, the portfolio took a $799 million loss.

With more than 91,000 employees and a headquarters in Downtown Pittsburgh’s U.S. Steel Tower, UPMC is the largest employer in Pennsylvania outside of the government.

“We do not plan to do any covid-related furloughs or layoffs,” Davis said.

UPMC’s provider network spans more than 4,900 physicians, 40 hospitals and 700 doctors’ and outpatient offices.

Telemedicine visits have spiked in recent months and will continue to be offered. Virtual health visits jumped from about 250 per day in March to 9,500 per day by the end of April.

UPMC’s medical insurance membership has grown to 3.8 million people.