PITTSBURGH—Highmark Health reported a “watershed” financial performance during 2017, reporting $1.1 billion in net income, an improvement of $1.0 billion over the prior year, as well as an operating gain of $616 million. The pre-tax results of $1.1 billion were driven by continued strengthened performance in the Health Plans' commercial and government segments, Allegheny Health Network's operational progress and growth, and the gain associated with sale of a portion of the vision business, Highmark CEO David Holmberg said.

The group’s total revenues of $18.3 billion remained consistent with the prior year due to an anticipated decline in Health Plan revenues associated with more sustainable product offerings, which was offset by growth at both Allegheny Health Network and HM Health Solutions, the company said. 2017 brought “our strongest financial performance,” Holmberg stated, adding that he sees the results as “confirming that our strategy is working and that consumers are benefiting from increased access to high-quality, community-based, affordable health care.”

Holmberg described the company’s deal to sell the majority of its Davis Vision managed vision care business to Centerbridge Partners, while maintaining a minority interest in that business, as one of “two major game changers” for Highmark in 2017. (The other is the Pennsylvania Insurance Board’s easing of requirements for approval before Highmark made significant investments in its burgeoning Allegheny Health Network, a move Holmberg described as “leveling the playing field” with the competition as the company builds its own integrated delivery system).

Davis was combined with Centerbridge’s Superior Vision managed vision care portfolio. In the deal, Centerbridge in turn took a minority investment in Highmark’s Visionworks’ optical retail business and Highmark retained its majority interest in that business. The deal, announced in August, closed in December, as VMAIL reported.

Said Holmberg, “Our agreement with Centerbridge Partners enabled us to create better opportunities for both Davis Vision and Visionworks to realize their full growth potential within the optical industry, and to deliver greater value to approximately 33 million customers.”

The Davis deal brought in a one-time net gain of $300 million to Highmark, noted Karen Hanlon, executive vice president and chief financial officer. Holmberg noted, “The agreement also secured a solid return on a valuable portfolio asset. It provided us with a significant amount of capital that we have already begun to strategically allocate to enhance our competitive position and accelerate our plans to deliver a better health care experience for our customers, members, patients and communities.”

In response to a VMAIL question about the company’s outlook for its vision business, Holmberg said, “We love the vision business and as we continue to have a majority interest in Visionworks, we will be focused on building this business and assisting the Davis folks. We see Visionworks as more of an open platform, and given its scale, with well over 700 stores, we are open to serving all in the marketplace. You know that Pete Bridgman is leading that business now, he’s done an extensive review and is starting to take actions now around a new market strategy and going forward approach.”