UPMC takes jab at Highmark's deal prospects

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UPMC's top financial officer reiterated Wednesday that the region's largest health system will not renew its contract with Highmark when it expires Dec. 31, while at the same time questioning Highmark's ability to make a go of it with its Allegheny Health Network.

UPMC cannot contract with Highmark, he said, based on documents filed with the state that say Highmark would need to draw 41,000 patient admissions from UPMC and community hospitals to be viable, shifting some $500 million in patient revenue from UPMC.

No matter how many members Highmark would retain a year from now, it would be less damaging to UPMC than losing that many patients and that much revenue, said CFO Robert DeMichiei.

"That would decimate UPMC as we know it today," he said.

Highmark spokesman Aaron Billger responded that the 41,000 patients issue "is a diversion from the real issue, which is UPMC's refusal to negotiate a system-wide contract with Highmark." Besides, he added, "UPMC stands to lose hundreds of thousands of patients who will be forced to go to non-UPMC hospitals and doctors if UPMC refuses to sign a contract with Highmark."

Mr. DeMichiei and UPMC treasurer C. Talbot Heppenstall Jr. also called into question the Allegheny Health Network's long-term viability, noting that financial disclosure to the state insurance department this week showed that the West Penn Allegheny Health System -- the cornerstone of the AHN -- did not meet even worst-case projections for net patient revenue and unrestricted cash.

In response, Mr. Billger said, "Allegheny Health Network is moving forward with a number of steps to revitalize West Penn Allegheny, and increasing patient volume is just one part of a comprehensive plan to make West Penn Allegheny stronger."

The comments by Mr. DeMichiei and Mr. Heppenstall came during UPMC's quarterly financial media briefing at its corporate offices in the U.S. Steel Building, Downtown.

UPMC, while seeing gains in patient volume and revenue, is feeling the same pressures as everyone else in what Mr. DeMichiei described as "a very challenging health care market."

For the October-December period, UPMC recorded $58 million in operating income, up from $13 million a year earlier. About $30 million of that increase was in provider services, while $12 million came from its overseas holdings.

For the first six months of the current fiscal year, patient admissions and observations grew to 144,038, up from 131,167 for the same period a year ago, aided by UPMC's acquisition of Altoona Regional Hospital.

Insurance service revenue through UPMC Health Plan was down $26 million over the six months from a year ago but revenue increased $16 million in UPMC's international ventures where, Mr. DeMichiei said, "We're seeing a lot of good things start to happen."

Steve Twedt: stwedt@post-gazette.com or 412-263-1963.

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