Highmark immersed in UPMC disputes

As Altoona Regional Health System focuses on UPMC as a potential big-brother partner, area residents may wonder about the affordability of their health care, should UPMC take control.

Would subscribers to health plans other than the one operated by UPMC have in-network coverage?

Altoona Regional recently deferred that question to UPMC, and UPMC declined to say, claiming the answer would be premature and speculative.

Still, one could argue that a UPMC takeover could bring this area into the vortex of a long-running dispute between UPMC, the dominant western Pennsylvania health care provider, and the region’s dominant health plan – Highmark.

Highmark has 44,000 subscribers in Blair County.

Highmark spokesman Michael Weinstein agreed with UPMC, saying the answer to the coverage question might be speculative, largely because “we don’t know what the relationship will be between UPMC and Altoona Regional.”

Nevertheless, Highmark subscribers should continue to have in-network access to Altoona Regional at least through 2014, as the health plan’s contract with Altoona expires at the end of next year.

Meanwhile, a mediated settlement achieved last year assures Highmark subscribers of in-network access to UPMC facilities generally through 2014, he said.

Nevertheless, speaking generally, Highmark has “ongoing concerns” that eventually “UPMC will limit access to non-profit community assets that were built and supported by taxpayer and foundation grants and subscriber premiums,” Weinstein wrote in an email.

For its part, Highmark wants to cut a deal to ensure that doesn’t happen, here and elsewhere, according to Weinstein.

Highmark is committed to “explore every alternative necessary to assure that our members continue to have access,” he said.

But the organizations remain at loggerheads.


antitrust lawsuit

UPMC is suing Highmark and West Penn for antitrust violations.

The lawsuit alleges that Highmark and the smaller hospital have conspired to preserve Highmark’s “monopsony” stranglehold on buying health insurance services from hospitals and doctors in western Pennsylvania and also its monopoly on selling health plans to employers and patients, according to court documents.

Highmark pays the struggling West Penn high reimbursements in exchange for the hospital refusing to accept lesser amounts from other health plans, according to the suit.

That keeps those rival plans out of the Pennsylvania market, according to UPMC. Meanwhile, Highmark pays UPMC low reimbursements, starving the provider of funds, forcing it to charge Highmark’s rival health plans more for hospital services.

That discourages those plans from setting up here, according to the suit.

The low reimbursements Highmark pays UPMC allows Highmark to keep the premiums it charges employers and patients low, assuring continuation of its market dominance, because rival plans can’t match those premiums, according to UPMC.

The threat to direct all its subscribers to West Penn takes away the leverage UPMC would otherwise have to hold out for better reimbursements, according to UPMC.

Highmark and West Penn counter that the UPMC suit is the epitome of hypocrisy, and that UPMC is the real monopolist, the dominant hospital in the region, seeking only to stamp out its one remaining rival, while building up its own health plan to take market share from Highmark.

West Penn targets both

But it wasn’t long ago that Highmark was a defendant with UPMC in a suit by West Penn alleging the big health plan and big hospital conspired to damage West Penn in violation of antitrust laws. West Penn alleged that UPMC “has engaged in a relentless campaign of anticompetitive, predatory conduct.”

UPMC had always been hostile toward West Penn, filing an unsuccessful suit to block the 2000 merger that created the smaller hospital, according to a 3rd U.S. Circuit Court of Appeals ruling on the suit, which found largely in favor of West Penn against the co-defendants.

UPMC traditionally was hostile toward Highmark, too, according to the court.

By contrast, the big health plan supported West Penn at first – not out of altruism, but to offset the otherwise nearly “unchecked dominance” of UPMC, according to the 3rd Circuit.

In 2002, Highmark gave the smaller hospital a $42 million capital grant.

It also started its Community Blue health plan, which benefited West Penn, to counter allegedly exorbitant reimbursement demands from UPMC, according to the 3rd Circuit document.

UPMC responded by starting its own health plan, which became Highmark’s main competitor in western Pennsylvania.

Starting in 1998, UPMC sought a “truce” with Highmark, by which both organizations would use market power to protect the other, according to the court.

Highmark resisted at first, but in 2002 gave in, which helped itself and UPMC get rich, according to the court.

As part of the conspiracy, UPMC refused to accept anything less than super-high reimbursements from Highmark rivals, thus helping to keep those rival plans at bay – even as it cut marketing and raised premiums on its own plan to give Highmark an advantage.

In exchange, Highmark began paying “supracompetitive” reimbursement rates to UPMC and took Community Blue off the market, which hurt West Penn.

Highmark also funded a new UPMC children’s hospital project, leaked damaging financial information about West Penn, cut off financial support for West Penn, refused to raise West Penn’s reimbursements and supported UPMC’s acquisition of its rival Mercy Hospital.

Paying higher rates forced Highmark to raise premiums, but Highmark didn’t pay the price in lost subscribers because the deal with UPMC insulated it from competition, according to the court documents.

Meanwhile, according to the West Penn suit, UPMC strong-armed community hospitals into ending referrals to West Penn by threatening otherwise to set up competing UPMC facilities nearby.

It also lured West Penn-affiliated doctors with over-market salaries, even when it had little use for them, to draw away referrals and damage its program, according to court documents.

In 2002, UPMC poached West Penn’s entire anesthesiology staff, according to the West Penn suit.

UPMC also interfered with West Penn’s borrowing of money by disparaging the smaller hospital to investors, according to the suit.

Local access wanted

Most plan-provider contracts have 90-day termination clauses, plus a “run-out” period, and in negotiations like the one that may be upcoming between UPMC and Altoona Regional, anything can happen, said local insurance broker Maureen Frucella.

But Altoona Regional’s board would probably not look favorably on eliminating in-network access for Highmark subscribers, she said.

She said she doesn’t know what UPMC intends, however.

Generally, she advises institutional clients to favor insurance plans that offer local access, because all patients want it, she said.

Altoona Regional’s recent history is reason to be optimistic, she said.

When the hospital came into existence in 2004 with the merger of Altoona and Bon Secours hospitals, the new organization avoided the loss of coverage that could have occurred for subscribers to the Geisinger Health Plan, which had a contract with Bon Secours, by absorbing that deal, she said.

Premiums a concern

Frucella is actually concerned more about costs than access.

“All big-city hospitals are more costly,” she said. “Is Altoona going to be able to hold [down] the charges?”

Many contracts between insurance companies and hospitals call for insurers to reimburse hospitals for particular services based on a percentage of stated charges, she said.

And a negotiated percentage of the bigger stated charge typical of city hospitals would mean bigger insurance reimbursements, which would translate into higher premiums, she said.

The stated charges listed for four arbitrarily chosen services listed in the Pennsylvania Health Care Cost Containment’s latest Hospital Performance Report for western Pennsylvania supports Frucella’s view:

UPMC’s flagship hospital, Presbyterian Shadyside, has the highest charges of all those listed for all four services, except for one hospital and one service – and that difference is slight.

For abnormal heartbeat, chest pain, chronic obstructive pulmonary disease and colorectal procedures, Presbyterian charges between 8 and 64 percent more than the state average and between 90 and 217 percent more than Altoona Regional.

Nevertheless, within the UPMC fold, there was a great variation in the charges, with outlying hospitals costing much less, which might indicate that Frucella’s fears are groundless.

The average hospital charge at UPMC Bedford, the lowest priced of the affiliates, was between 60 and 77 percent below Presbyterian, for example.

Another cause for optimism: Over the years, Altoona Regional has tended to avoid disruptive escalations from contract-to-contract, Frucella said.

The hospital has also worked hard to “create a level playing field” for reimbursements among different health plans, she said.

If that should continue under UPMC, it would seem to bode well for Highmark subscribers.

Mirror Staff Writer William Kibler is at 949-7038.