Highmark, UPMC drive health care industry

Health giants' dominance raises concern over prices and innovation


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Looking at the list of health care entities in Western Pennsylvania recording the highest revenues, it is easy to see why the ongoing Highmark-West Penn Allegheny-UPMC affiliations and battles have drawn so much attention.

The three collectively employ nearly 70,000 people and brought in more than $25 billion in revenue in 2012, with Highmark's $15.2 billion claiming the lion's share.

As the only members of local health care's billion-dollar club, they are effectively the "meds" in our "meds and eds" economy.

"They are a huge part of the economy," said Stephen Foreman, associate professor of health care administration at Robert Morris University -- and possibly too huge.

"It's clearly not a good situation," said Martin Gaynor, the E.J. Barone Professor of Economics and Health Policy at Carnegie Mellon University.

PG graphic: The region's largest health care organizations based on 2012 revenue
(Click image for larger version)

"There is a lot of good being done by both of these entities. UPMC has some of the best facilities in the world and they've got terrific physicians and nurses. But, in the long term, I don't think it's so good for our regional economy."

And the big are only getting bigger.

Among the 2012 list of the region's biggest health care organizations, the West Penn Allegheny Health System and Jefferson Regional Medical Center are now part of the Highmark family.

"The real problem with consolidation is that you don't get much in the way of innovation," Mr. Foreman said. "Why would UPMC innovate? They can fix prices pretty much and they've got no real incentive to be more efficient at this point. Why do they have to provide hospital services that are cheaper and better?"

Others on the list, such as Excela Health in Westmoreland County and St. Clair Health in Mt. Lebanon, have steadfastly held on to their independence.

"If Highmark can stop the bleeding at West Penn Allegheny and really turn them around, and make them a viable alternative to UPMC, we could come out the other side in a better place," said Mr. Gaynor.

But even in that scenario, Mr. Foreman worries about the future for the smaller independent facilities if they have to compete with UPMC's vast network and Highmark's plans for its own health care delivery network.

"If Highmark turns West Penn Allegheny around, they're going to have to move patients there from other places. I just fear these community hospitals are going to get hurt," he said.

intheleadcompanies

-- Steve Twedt: stwedt@post-gazette.com or 412-263-1963 First Published May 3, 2013 4:00 AM


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