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Highmark Health blames risk corridor program for operating loss

Nonprofit reported loss of $37M in 2014 but expects $155M back from risk corridor

Nonprofit Highmark Health--formed in 2013 as the parent of Highmark and hospital system Allegheny Health Network--this week reported mixed financial results for 2014.

The organization posted an operating revenue of $16.8 billion--an increase of more than 6 percent since 2013. Despite reporting a deficit of revenue over expenses of $83 million in 2014, Highmark Health said it remains stable and maintains nearly $6.5 billion in cash and investments.

The organization recorded an operating loss of $37 million, which represents a $365 million improvement since 2013 that included $311 million one-time goodwill impairment.

The loss, in part, is thanks to negative results from selling Affordable Care Act health plans, the organization said--particularly "actions related to the collectability of risk corridor payments."

According to Karen Hanlon, executive vice president and chief financial officer, "Highmark Health continues to manage costs and operational performance, and we will take the steps that are necessary to sustain a solid financial foundation in order to support our customers and members. The risk corridor is an issue that health plans around the country are facing and Highmark Health believes that most, if not all, of these payments will be recovered, but took an appropriately conservative accounting approach."

Highmark Health would have reaped financial benefits had it recorded as 2014 revenue the $155 million it expects to receive as a result of the risk corridor program. Excluding the risk corridor revenue, the organization reported an operating loss of $178 million for 2014, an increase of $52 million (or 41 percent) from the $126 million loss recorded in 2013.

Ever since Highmark and the University of Pittsburgh Medical Center (UPMC) called it quits last summer after having worked together for decades, Highmark's health insurance business has been under pressure, reported TribLive Business. Last year, Highmark Health invested $500 million to propel competition between Allegheny Health and UPMC by recruiting new physicians and building outpatient centers.

For more:
- here's the Highmark Health announcement
- check out the TribLive Business article

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Consumers unsure how Highmark-UPMC breakup impacts them
Competition sparks payer-provider divorce
Highmark's excess profits violate state law, lawsuit claims