Highmark and UPMC bickering over insurer's West Penn affiliation

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To no one's surprise, Pittsburgh health care giants Highmark and UPMC have staked out markedly different positions on Highmark's proposed affiliation with the West Penn Allegheny Health System.

In letters submitted to the Pennsylvania Insurance Department as the public comment period ended Friday, Highmark made the case for a vibrant health care system to compete with UPMC. Officials for the insurer say claims data show health care services provided at UPMC facilities instead of community hospitals since 2007 have increased local costs "at least $2.7 billion more than if they had been performed at community hospitals," spokesman Aaron Billger said.

UPMC officials do not oppose the Highmark-WPAHS affiliation, but, in a seven-page letter to the insurance department, chief legal officer W. Thomas McGough Jr. urged state officials to preserve local competition by blocking Highmark from trying to renew its contracts with UPMC when they expire in 2015.

Otherwise, Mr. McGough noted, the Pittsburgh market would become a "health care duopoly," with the two health systems controlling "at least 73 percent of the insurance market and 63 percent of the provider market."

The combination, he added, "would easily extinguish any remaining or the future prospect of competition in health care in Western Pennsylvania, and for that reason alone is a very bad idea."

The insurance department is in the final stages of reviewing Highmark's plans to acquire the financially ailing WPAHS. The two parties signed an 18-month agreement in 2011 that expires at the end of April, but the partnership requires state approval to go forward.

Highmark's pitch is that its integrated delivery system will provide low-cost, high-quality health care and make better use of community hospitals. "It is our objective to keep care in the community," Mr. Billger said.

The insurer has consistently expressed interest in continuing a contractual agreement with UPMC beyond 2014 so its members will continue to have in-network access to UPMC physicians and facilities. UPMC, which has more than 20 hospitals and employs more than 3,200 physicians, has just as consistently said it will not extend the agreement now that Highmark is setting up a competing health care delivery system.

State Sen. Don White, R-Indiana, in a letter to Republican Gov. Tom Corbett last week, suggested that approval of the Highmark-WPAHS affiliation include a requirement that Highmark file "a plan of transition for its policyholders" if the UPMC contract expires.

"Requiring a transition plan as part of any approval will give consumers the knowledge and predictability they need to make choices on insurance and medical care," he wrote.

Also submitting comments to the insurance department was David W. Fields, president and CEO of HealthAmerica, who voiced support for the Highmark-WPAHS affiliation.

But he cautioned that "[e]xtreme care must be taken in establishing appropriate safeguards around the transaction so that Highmark does not end up with the ability to exert absolute control over health insurance" in Western Pennsylvania.

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


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