UPMC Reports Higher First-Half Revenue, Significant Investments for the Future.

PITTSBURGH -- Driven by growing patient volumes, higher insurance services membership and a strong investment portfolio, the University of Pittsburgh Medical Center (UPMC) today reported a 15 percent gain in total revenue, to a record $3.3 billion, for the six months ending Dec. 31, 2006. Excess margin--or margin from operations and investment activity--rose 52 percent to $342 million.

Operating revenue grew by $269 million to $3.02 billion. At the same time, increased expenses to support future growth resulted in a $38 million decrease in operating margin, to $124 million. UPMC added the equivalent of more than 600 full-time positions in the six-month period, including nearly 150 physicians. These additions were made to ensure that patients have timely access to high-quality care. Increased support for the academic mission and investments in the expansion of safety-enhancing electronic medical records in UPMC's physician practices also contributed to the increased operating expenses. "As expected, significant investments in the well-being of our patients affected the margin in this period," said Robert DeMichiei, chief financial officer. "UPMC's ongoing focus is on what's best for our patients and the communities we serve."

Honored by U.S. News & World Report for the quality of its hospitals and its insurance plans, UPMC continued to see increases in hospital admissions, outpatient volumes and market share. Medical-surgical admissions to UPMC's hospitals rose 3 percent for the six months compared with the year-ago period, while outpatient activity rose 13 percent. "Higher patient volumes reflect UPMC's commitment to enhancing access to our world-renowned medical care. By providing the appropriate physician resources, improving our scheduling practices and using 'mystery shoppers' to confirm our service performance, we are now seeing most patients within two to three days of the request for an appointment," noted Elizabeth Concordia, senior vice president, academic and community hospitals. "Offering excellent service to our patients is fundamental to our mission."

Capital expenditures during the six months increased by $94 million to $231 million. Major projects include ongoing construction of the Children's Hospital and research complex in Lawrenceville and a new research facility at Magee-Womens Hospital.

UPMC's net investing activity for the six months rose to $220 million from $73 million in the year-ago period. The gain reflected a 9.8 percent return on UPMC's investment portfolio and a change in the classification of certain investments. As a result, both realized and unrealized gains and losses are reflected in the consolidated statement of operations. Previously, the changes in the fair value of these investments were recorded only on the balance sheet. "Although this reclassification may cause more volatility in reported investing results, we believe it also will provide more transparent and timely information about our investments to stakeholders," DeMichiei said. Net investing activity in the latest period included approximately $48 million in net unrealized gains that occurred prior to June 30, 2006.

The University of Pittsburgh Medical Center (UPMC) is the largest integrated health care enterprise in Pennsylvania and one of the leading nonprofit health systems in the country. It is the only organization that has earned honor roll status in both U.S. News & World Report's 2006 "America's Best Hospitals" and "America's Best Health Plans" rankings. Widely recognized for its innovations in patient care, research, technology and health care management, UPMC has transformed the economic landscape in western Pennsylvania. The region's largest employer, with 43,000 employees and nearly $6 billion in revenue, UPMC comprises 19 tertiary, specialty and community hospitals, 400 outpatient sites and doctors' offices, retirement and long-term care facilities, an insurance plan, and commercial and international ventures. Nearly 5,000 physicians are affiliated with UPMC, including more than 2,300 employed physicians. Since April 2005, UPMC has signed joint development agreements with such industry leaders as IBM, Cerner, Alcatel and dbMotion valued at more than $175 million. UPMC and its partners aim to commercialize innovative technologies and services that will enhance the safety and efficiency of health care worldwide. For more information, visit www.upmc.com.

Note: For UPMC's Unaudited Quarterly Disclosure Statement for the period ending Dec. 31, 2006, please click here or visit http://www.upmc.com/NR/rdonlyres/92B89C3F-1DE8-45A7-89E5-BE5388451AA1 /0/QuarterlyDisclosure.pdf. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)