A lifetime spent in Pittsburgh has armed me with three topics guaranteed to get a conversation started: change, health care and large nonprofits acting like businesses.
Change? We're against it. Unless, of course, someone goes way out on a limb and proves that it's a good thing. Then we really like it.
Health care? We're for it, particularly where it's world class, readily accessible and creates tens of thousands of jobs in the region. But it's too expensive.
Nonprofits acting like businesses? We're highly suspicious, to say the least. After all, they're exempt from some taxes and are supposed to put the public interest ahead of pursuing profits. As Sally Kalson expressed it in her Post-Gazette column last Sunday, "[T]he Pittsburgh Symphony doesn't try to take down the opera."
When all three of those topics get mashed together, as they have in the face-off between Highmark and University of Pittsburgh Medical Center, we can expect a torrent of opinionating. So, as chief legal officer of UPMC, I haven't been surprised by either the amount or the passion of the public debate that has occurred. What has surprised me, however, is how shortsighted some of the commentary has been, particularly from quarters where more imagination usually resides.
I was stunned, for example, by a recent Post-Gazette editorial that posed two supposedly unthinkable propositions: "Imagine Highmark insurance policies that don't cover care by UPMC doctors. Imagine UPMC hospitals where Highmark insurance is no good." You would have thought they were asking us to imagine a world where the Pirates were above .500 in mid-June.
Wait. That last one really happened. And so could a world where Highmark isn't the region's dominant health insurer, the gatekeeper for more than 65 percent of the care delivered in Western Pennsylvania.
I realize that concept will take a while to settle in, even though the last decade hasn't exactly been a picnic for health insurance subscribers. Unfettered by national competition, Highmark has imposed double-digit premium increases, while the rates it paid to UPMC increased only at the rate of inflation. Ms. Kalson accurately, if unintentionally, captured our collective ambivalence about Highmark's performance as gatekeeper when she demanded, "I want to pick my doctors of my own free will and have their services covered by the insurance that's already costing a king's ransom."
How did we get to this strange place?
The 10-year contracts that keep UPMC hospitals and doctors in Highmark's service network expire in mid-2012, so the companies began discussing renewal more than a year ago. Recently, Highmark has been saying that UPMC demanded a 20 percent increase in rates. Or was it 40 percent? Highmark can't seem to remember, probably because it was neither.
In fact, after months of halting discussions, UPMC and Highmark reached an understanding that an independent third party would advise both companies on the market rates in comparable cities for similar services. That understanding became completely irrelevant, however, when the press revealed in April that Highmark was buying West Penn Allegheny Health System to compete directly with UPMC and all the other hospitals in this region.
Why was that a showstopper? Remember Highmark's historical role as everyone's gatekeeper. If Highmark spends, say, $2 billion of its hard-earned subscriber premiums to acquire and rebuild a twice-failed hospital system, it's going to make darned sure those hospital beds are filled. Every other hospital for which it had been gatekeeping would lose patients accordingly.
In addition, premiums Highmark earned on any UPMC contract would wind up funding Highmark's own hospital system, making such a deal illogical, unrealistic and ultimately anticompetitive. So UPMC will not reappoint Highmark as gatekeeper and instead will compete head-on, hospital system to hospital system.
As disconcerting as competition among nonprofits may seem, nothing about nonprofit status exempts a company from market forces or antitrust regulation -- any more than it exempts it from the law of gravity. If the Pittsburgh Symphony announced that it was going to produce and market its own opera series -- in the name of operatic choice, of course -- few would criticize the Pittsburgh Opera if it let any contracts with the symphony expire and looked about for new musical partners.
As Highmark transforms itself into a hospital system, let's at least give it credit for competitive imagination. Consider what the market might look like a few years from now.
Four large national insurers (Aetna, CIGNA, HealthAmerica and United Healthcare) have contracted with UPMC to include its doctors and hospitals in their existing networks. UPMC's own health plan offers a network featuring UPMC hospitals and doctors as well as many community hospitals. Highmark offers a network featuring WPAHS and other community hospitals. So if you want WPAHS, choose Highmark insurance. If you want UPMC, choose the UPMC Health Plan or any of the national insurers. And if you want both, choose any of the national insurers, which will offer those options and more.
The transition will, of course, involve some disruption. But the really disruptive event is Highmark's impending self-transformation into a hospital system; the other disruptions are just the inevitable aftershocks, and mild ones at that.
Employers will have to make sure they offer their employees the insurance options they need. Individuals will have to choose their plans based in part upon where they want to get their health care. If people change doctors rather than changing insurance plans, electronic records will have to be carefully transferred. But we have months to accomplish all those things and six different insurers to get the messages out. They will, after all, be competing for your business on price, quality and access.
Any disruption will also be confined to the "commercial" market; Medicare and Medicaid plans will not be affected. In that commercial market, individual issues will undoubtedly arise relating to continuity of care, ongoing courses of treatment and longer-term commitments extending beyond the expiration date. But the contracts between UPMC and Highmark are designed to expire someday and therefore address many of these complexities. Others can be managed cooperatively, in the best interests of the patients and the community, as they arise.
Our health care system, both locally and nationally, is changing rapidly. Closing our eyes and digging in our heels is not an option. The current rift between Highmark and UPMC actually provides us with an opportunity to change things for the better.
Tom McGough is senior vice president and chief legal officer of UPMC.