Nobody needs to make the comparison between Andrew Carnegie's steel empire and UPMC. UPMC has made it itself, by affixing its logo atop the U.S. Steel Tower.
And the points of comparison are many, including size, influence and the way these companies have done business.
Carnegie Steel, which became U.S. Steel, was famous for pioneering vertical integration. It not only owned the facilities to make steel, it also owned iron mines, coal mines and railroads. It owned the basic ingredient, the energy source and the means of transportation. Carnegie Steel controlled the market.
What's developing in the Pittsburgh health care market, ground zero for a broader national trend, is not simply a monopoly of health care services -- though that is occurring. Potentially, it's the creation of a vertical monopoly to rival Carnegie's in the early 1900s. Pittsburgh is like a proverbial canary in one of Carnegie's coal mines.
It's strange for us -- even unsettling -- to think of sick patients as "market share." But whether the average Pennsylvanian considers his knee injury or her daughter's asthma as part of the "patient volume" that contributes to a hospital system's bottom line, hospital executives certainly do.
Large health care systems around the country are consolidating at unprecedented rates to control an ever-larger part of patient services. They own both general hospitals and critical specialized institutions -- such as Children's Hospital of UPMC and UPMC Hillman Cancer Center -- that people seek out in a crisis. But these health systems also have bought up countless physicians' offices, which are a source of patients, and built or bought satellite hospitals, outpatient facilities and urgent care centers. Meanwhile, health care systems and insurers are consolidating to provide health care services, collect premiums from patients and make insurance payments to their own doctors and hospitals.
Ideally, all of this consolidation would work in patients' favor. Doctors and nurses could coordinate care more effectively and efficiently. Larger networks could stretch dollars further.
But if left unchecked, this kind of consolidation may be great only for hospital executives and bad for the rest of us. That's why we have introduced legislation to get in front of these trends in hopes of redirecting the conversation away from patient volume and back to patient care.
Right now, once a hospital system has captured enough "market share" -- that's you and me and our neighbors when we get sick -- it has enormous leverage over how services are provided, what they cost and how they are paid for.
We've been watching this unfold in Western Pennsylvania for decades. Today we hear about UPMC refusing to accept patients insured through Highmark. But just a few years ago we heard about our major local hospital system refusing to contract with national insurers.
In northeastern Pennsylvania, Geisinger Health System has refused to contract with any outside Medicare Advantage companies, which appears to be driving up health care costs for seniors. That's a problem.
Given its large share of the Pittsburgh health insurance market, Highmark's recent purchase of the Allegheny West Penn Health System could generate the same concerns -- unless we set some rules.
If we want the highest-quality, highest-value health care networks, we need two things: full access and true competition. Our legislation would accomplish this in several ways:
• First, hospital executives would not be able to force providers to refuse to see patients because they have the "wrong" insurance card. There would be no wrong insurance card when it comes to receiving services at nonprofit hospitals built with community dollars.
• Hospitals couldn't stand in the way of "tiered" health plans that pass on savings in the form of lower co-pays and premiums when patients choose low-cost providers.
Right now we're charged the same amount whether we go to a hospital that bills our insurance company $300 or $3,000. A good tiered product could allow us to pay less out of pocket up front if we choose doctors or hospitals that bill our insurance companies less. Insurance companies would pass the savings along to us. If we wanted to go to a higher-cost hospital, we could still do so and pay a little more.
Western Pennsylvanians are not familiar with these tiered plans because we haven't seen many in our region. Expensive hospitals don't like these plans, which force them to compete with high-quality, less expensive hospitals. Western Pennsylvania hospital executives have refused to allow them -- something they've admitted publicly. Our legislation would prevent this.
• Hospital health plans under our legislation would compete for customers on their merits, not on their affiliations. Hospitals couldn't use the profits received from an outside insurance company to subsidize their own health insurance plans.
• Finally, hospital systems couldn't buy doctors' practices and essentially force doctors to sign non-compete clauses that make them leave town to practice medicine if they don't want to work for that system.
Carnegie Steel used its vertical monopoly to make a fortune in the steel industry. But despite the many similarities between today's health care industry and the industrialists of the gilded age, there is one critical difference: These hospitals are supposed to be not-for-profit corporations, and their bottom line is supposed to be the public good.
State Rep. Dan Frankel, D-Squirrel Hill, represents the 23rd Legislative District. State Rep. Jim Christiana, R-Beaver, represents the 15th Legislative District. First Published October 12, 2013 8:00 PM