Increased covid-19, labor costs eat into UPMC’s first-quarter income

UPMC reported a sharp decline in operating and investment income during the year’s first quarter, with the health care giant pointing to continued financial challenges from covid-19 and increased labor costs, according to an earnings report released Thursday.

The report showed that UPMC had nearly $6.1 billion in total operating revenues during the first three months of the year, including money brought in by the nonprofit’s health and insurance services. That was up 1.3% from just over $6 billion during the same period a year ago, the report showed.

UPMC’s total operating expenses in the first quarter, however, increased by more than $300 million year over year, reducing the health care giant’s operating income or profit from $288 million during last year’s first quarter to $50 million this year — a drop of about 83%.

The report also showed that UPMC’s losses from investing and financing activities totaled $242 million in the first quarter, down from a gain of $326 million during the same period a year ago.

In its financial report, UPMC said the drop in operating income “is primarily the result of the continued effects of covid-19, including the most recent surge, as well as cost growth (that exceeded) revenue growth due to employment, staffing and other expenses caused by conditions in the labor and supply markets.”

UPMC added that CARES Act, American Rescue Plan and employee-retention credit funding it received from the federal government was $49 million less in the first quarter compared with last year.

UPMC reported that it put $250 million toward capital expenditures in the first quarter, up from $186 million during the same period a year. It said the money was used on facility construction and clinical program innovations and improvements.

Executives said such investments have helped transform UPMC Jameson in New Castle from a struggling community hospital to a regional health care destination. UPMC said it has invested more than $100 million in Jameson since it became part of the UPMC network in 2016, helping the hospital add clinical programs and improve facilities.

“The UPMC Jameson story is another example of how UPMC is committed to smartly reinvesting in advancing the care that is needed across all our regions, and we are well-positioned to continue our record of success well into the future,” said Edward Karlovich, executive vice president and chief financial officer at UPMC.