'Tiering and steering' a contentious issue for local health care

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"Tiering and steering" is the catch phrase at the heart of the three-year dispute that threatens to end the UPMC-Highmark relationship.

Health provider UPMC believes if it signs a contract with Highmark after this year, the Pittsburgh insurer will assign UPMC's doctors and hospitals to its most expensive tier in order to recoup the billions of dollars it is spending to develop its own provider network. By making it more expensive to get care through UPMC operations, patients would be "steered" to hospitals in Highmark's Allegheny Health Network.

"There will not be a contract, there cannot be a contract, because we cannot put the fate of UPMC into the hands of Highmark," said Robert DeMichiei, UPMC's chief financial officer.

Highmark's president of health markets, Michael Fiaschetti, said it's "absolutely not true" that Highmark intends to aggressively steer patients to its hospitals. "Our true north is value. It's cost and quality."

But what, exactly, is tiering and why has it become so contentious in our part of the state?

At its most basic level, tiering separates hospitals into different groups based on the cost and the quality of care they provide. Insurers, employers and just about anyone who pays for health care wants that information so they can decide the best-yet-still-affordable place for patients to get care. Following that determination, patients who go to a hospital in a higher tier may pay higher premiums, deductibles or copayments.

The idea of tiering also can give officials at major academic centers a case of heartburn.

On Jan. 1, Highmark introduced a tiered product called Community Blue Premier Flex in central Pennsylvania, even as Geisinger president and CEO Glenn Steele Jr. had circulated a "Dear Friend and Neighbor" letter criticizing the plan for excluding Geisinger -- that region's premier health system -- from the list of "enhanced value" providers, saying the move would drive patients to other hospitals.

Nearly four months into tiering, Geisinger spokesman Matthew Stone said, "We have not experienced any growth in the number of patients using the Highmark Community Blue product," adding that, "This early trend speaks to the value we provide our patients and their preference for accessing Geisinger care."

Another factor may be that the Highmark plan, with 70,000 members, is not the dominant player that it is in Pittsburgh. Community Blue Premier Flex was launched in an insurance market that includes Capital Blue Cross, which does not offer a tiered structure for its 2 million beneficiaries, and Geisinger's own health plan, with just fewer than 1.5 million policyholders.

Independence Blue Cross in southeast Pennsylvania is another matter, as its 8 million policyholders ranks second only to Highmark statewide. It also instituted a tiering structure Jan. 1 that puts that area's most highly regarded centers -- the University of Pennsylvania, Thomas Jefferson and Temple among them -- in the most-expensive Tier 3. There is no deductible required for Tier 1 centers and a $3,000 deductible for Tier 3 centers.

"In general, the big academic centers will be in tiers that give patients a financial incentive to look for another place," said Ralph Muller, CEO of the University of Pennsylvania Health System. Large academic medical centers cost more because of their added costs for acquiring new technology, supporting research and training future clinicians.

"I'm quite concerned about how confusing this is going to be for the patient. Patients are going to be very angry at somebody -- the doctors, the hospital, the insurer," Dr. Muller said. "We are concerned about what the long-term consequences will be," although he expects it will take at least a year to understand the full effect of tiering.

Mr. DeMichiei said UPMC does not oppose tiering as such, and welcomes competition.

"Where our concern is that Highmark is an entity which is highly motivated to tier and steer away from UPMC," he said. "They are constructing a competing provider system that is going to cost them billions of dollars, so they must tier and steer."

Mr. Fiaschetti adamantly disagrees. "We want to build the best health care system for the people of Western Pennsylvania," he said. "We are going to build a system of tomorrow, not yesterday, and I'll be frank -- the focus is not on inpatient care."

He offered Highmark's plans to open a medical mall outpatient clinic in Wexford later this year as just one example of serving patients outside of hospitals.

"The emergency room and inpatient care is not always the best area to provide care," said Mr. Fiaschetti. "And, at the end of the day, if we don't get a handle on the cost and quality, none of this is going to be sustainable."

Mr. Fiaschetti said Highmark still would welcome the chance to collaborate with UPMC in shaping the region's health care for coming years.

Mr. DeMichiei suggests the two sides should be discussing how to smooth the transition for their impending split.

Signing a contract with Highmark would cause serious harm to UPMC "in the short term, the midterm and long term," he said. "This has been analyzed, strategized and studied by this organization for years.

"I will absolutely tell you that there will not be a contract. There cannot be a contract."

Health policy expert Harold D. Miller, president of Pittsburgh-based Future Strategies LLC and adjunct professor of public policy and management at Carnegie Mellon University, sees both merits and demerits to each side.

"I think UPMC does have a legitimate gripe with the way Highmark has structured their plans. It basically puts any UPMC hospital in a specific tier from everything else, no matter which hospital you go to, no matter what you go to the hospital for," he said.

"That doesn't mean that Highmark doesn't have a legitimate gripe with UPMC's costs and other tactics, but it's hard to defend either of them as doing the right thing."

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

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