On Jan. 1, UPMC will achieve its long-sought divorce from Highmark. The separation will undoubtedly disrupt care, add untold stress and potentially harm thousands. UPMC, in refusing even to negotiate a renewed contract, has plainly driven the breakup.
UPMC’s grounds for divorcing Highmark are tenuous. In testimony to the Legislature, UPMC complained that Highmark threatens to injure UPMC by “steering” patients to the “now-struggling” Allegheny Health Network, which Highmark has supported to serve as competitive foil to UPMC.
UPMC further explained, “Western Pennsylvania simply has too many hospital beds, and any gain in admissions at one hospital must come at the expense of other hospitals.”
In brief, UPMC believes competition against Highmark is good, but competition against UPMC is bad. UPMC touts creation of the UPMC Health Plan as “a competitive thorn in Highmark’s side,” but derides its own competitors as malevolent meddlers. As once explained by its CEO, UPMC’s goal is to create a “benevolent monopoly.” Unfortunately, monopolies are rarely benevolent, and there is nothing suggesting that UPMC would forgo (untaxed) profits for the public good.
In any event, UPMC’s strategy is risky — for itself and even more so for the region. Highmark health plans have historically paid for a sizable portion of UPMC patients. To replace Highmark’s payments, UPMC has few options: It can persuade enough Highmark patients to switch to the UPMC Health Plan or other in-network plans (and charge more for those patients than Highmark previously paid); it can persuade enough Highmark subscribers to elect UPMC as a non-network provider; and/or it can raise prices across the board.
Most health plan subscribers understand that out-of-network services cost more than in-network services. What they don’t understand is how much more those services are likely to cost. In general, hospital prices are set in a secret “chargemaster,” an internal price list that covers thousands of items that may be included in a patient’s bill. Chargemaster prices are generally much higher than negotiated rates and may be absurdly high. Fortunately, most people don’t pay chargemaster prices, because of insurance coverage, Medicare or Medicaid.
When a hospital is “out of network,” however, its secret chargemaster can wreak havoc on unsuspecting health plan subscribers.
Suppose the chargemaster price for a medical test is $800, but Highmark’s “in network” price is $500. To get the test “in network,” you would likely pay $100 (or 20 percent) as co-insurance. To get the same test out of network, you might expect to pay only 20 percent more. If so, you’d be wrong. Instead, you would end up paying $500 for the test — 40 percent of the allowed $500 amount (i.e., $200) plus a “balance bill” from the hospital for the remainder of the chargemaster price (i.e., $300). (A “balance bill” is a direct charge to a patient for amounts not covered by insurance.)
If you think your plan’s annual “out of pocket” maximum would guard against inflated chargemaster prices you’d be wrong again. Ordinarily, an annual “maximum” on out-of-pocket payment does not count balance billed amounts.
If this sounds implausible, consider UPMC’s refusal to provide any services to patients covered by Highmark’s Community Blue plan. UPMC justified this denial of care on grounds that its contract with Highmark prohibited balance billing. According to UPMC, the “happy coda” to this controversy is that “on Dec. 31, 2014, [Community Blue’s] prohibition on balance billing will expire, and thereafter its subscribers will have full, out-of-network access to UPMC.” While this may be a happy resolution for UPMC, it is unlikely that any out-of-network patients will be especially happy when they receive a super-sized “balance bill” from UPMC.
In the end, after substantial disruption, everyone will recognize that out-of-network services are not financially viable and choose network services from Highmark/AHN, UPMC Health Plan/UPMC or a national insurer (e.g., Aetna, Cigna). If we were starting from scratch, a market of competing insurance/hospitals (i.e., integrated health systems) might be beneficial — think of the Mayo Clinic competing with Kaiser Permanente and Geisinger.
But we are not starting from scratch. We did not sign up for restricted or monopoly-priced access to essential or acclaimed health services when we subsidized the development and expansion of UPMC through tax exemptions, tax-exempt bonds and local philanthropy.
Of course, UPMC could shed light on its post-divorce plans. To help it along the way, here are a few questions:
1. How do you plan to make up the money lost from Highmark after you exclude its plans?
2. Will your prices (i.e., actual prices rather than chargemaster prices) for in-network services increase or decrease after you exclude Highmark?
3. What prices do you plan to charge for out-of-network services after you exclude Highmark? (Be specific).
4. What will happen to you if Highmark keeps its subscribers and those subscribers don’t use your services out-of-network?
If UPMC can’t answer these questions, then its decision to exclude Highmark is little more than an egotistical gamble at the region’s expense. If UPMC is unwilling to answer these questions, then we know the answers would not give us much comfort.
Gary L. Kaplan (firstname.lastname@example.org) is a Pittsburgh attorney who teaches health law at Heinz College, Carnegie Mellon University.