Health care trend here echoes nation's

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A leading local health policy expert says he thinks "there will be a contract at some point" between insurer Highmark and UPMC -- a statement Thursday that a top UPMC executive quickly shot down.

"Why would our board ever agree to harm ourselves?" asked Diane Holder, president and CEO of UPMC Health Plan.

The exchange -- more friendly disagreement than argument -- came at the Pittsburgh Business Group on Health's annual symposium Downtown after Stephen Foreman, associate professor of economics and health administration at Robert Morris University, made a presentation on health care consolidation.

What is happening in health care both locally and nationally mirrors the consolidation in many other industries in recent decades, Mr. Foreman explained. "We have become an economy dominated by large firms."

Pittsburghers currently have a front-row seat on the health care consolidation trend with Highmark's Allegheny Health Network and UPMC each buying up hospitals and physician practices in anticipation of the UPMC-Highmark in-network contract ending after Dec. 31, 2014.

With the two health giants competing for patients, each with a provider arm and an insurance arm, "there will be price competition in the short run," said Mr. Foreman, but there will also be duplication of services and other inefficiencies.

Money will be spent -- and is already being spent -- to buy more hospitals and physician practices, to launch marketing campaigns, to cover legal fees, and to pay assorted other costs that come with high-stakes competition.

"Highmark and UPMC will both be dipping into their reserves," he predicted, and eventually "they will learn to cooperate. If UPMC and Highmark can't do it, there will be heavy pressure politically to make some kind of cooperation happen."

UPMC has insisted there will be no contract extension in 2015 now that Highmark is building its own network of hospitals, citing Highmark filings with the state that it would need to draw 41,000 patient admissions away from UPMC and other community hospitals in order to be profitable.

Ms. Holder said that UPMC welcomes the competition and Highmark's entry into the local provider market, "but they should not expect us to fund it for them."

While UPMC has come under criticism for threatening to block in-network access to its facilities and physicians for Highmark subscribers after 2014, she said, "I think there's a misunderstanding of how problematic it would be if there was a contract extension between Highmark and UPMC."

Not only UPMC but also the communities it serves would be hurt, she added, noting UPMC's role in educating and training health professionals as well as treating patients.

While Highmark says it has maintained a 90 percent renewal rate, Ms. Holder expects employers will want to offer their workers a choice of health plans, including ones that offer in-network access to UPMC.

Highmark, for its part, reiterated Thursday that it "is ready to negotiate an affordable, long-term contract with UPMC," said spokesman Aaron Billger. "The community wants UPMC and Highmark to work together to negotiate a new contract and improve the quality, affordability and accessibility of health care for everyone."

However it turns out, said Mr. Foreman, in the end "we need both of them and we need both of them to do well. They are an integral part of our community."

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Steve Twedt: or 412-263-1963.


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