Highmark Health Posts Record 2016 Revenues, Vision Businesses Reach $1.6B in Revenues

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PITTSBURGH—Highmark Health reported record operating revenues of $18.2 billion for 2016, 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, company executives said.

Of the Highmark Health’s overall 2016 performance, David Holmberg, president and CEO, said, “We began the year determined to improve our financial performance and break new ground in fulfilling the promise of our integrated delivery and financing system. Our focus was on reinforcing the financial strength and stability of the overall enterprise and continuing to build the core operational and technology platforms needed to support the long-term strategy we laid out in 2015.

“We succeeded, and in the process delivered steady, consolidated and cumulative top-line growth of nearly $3 billion during the last three years. We continue to increase our scale, we are financially strong and stable, and we maintain our leading positions in the markets in which we compete.”

For its vision company, HVHC, Inc, which is part of Highmark’s Diversified Businesses unit, 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 Cincinnati, Ohio, Seattle and 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. Davis 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.

On a call following the release of the company’s results, Holmberg said, “Visionworks experienced soft sales in the first half, but it saw improvement in the second half. After the presidential election, business took off again and so we saw a good fourth quarter.” In response to a question from VMail, about the status of the company’s exploration of a potential sale of the HVHC division, which was originally disclosed in June 2016, Holmberg said, “We continue to receive interest in the business. One of the unique things about vision is that it has a retail component and a significant and dramatic health care component. We have nothing new to report, however, at this time.”

“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 CFO. “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.”

Highmark Health 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 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. 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, which include HVHC, as noted above, 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.

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.

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.