Highmark, UPMC reach agreement until 2015

Gov. Tom Corbett this afternoon announced Highmark and UPMC have reached a deal to provide Highmark insurance customers with in-network access to all UPMC physicians and hospitals through 2014.

Speaking to reporters at the Capitol, Mr. Corbett said he brought the two Pittsburgh health companies together several weeks ago to negotiate with the help of a third-party mediator, David F. Simon, the executive vice president and chief legal officer of Jefferson Health System in Southeastern Pennsylvania.

While Mr. Corbett said he never personally sat at the negotiating table, he said he urged representatives of the two companies to reach a deal.

"I encouraged them that they need to address this issue," Mr. Corbett said. "They need to get it done. With the assistance of the Legislature backing me up, that if they did not get this done, we would get it done for them."

The governor did not elaborate about how the state would prompt the feuding companies to reach an accord but he noted the benefits Highmark and UPMC receive from their tax-exempt status as non-profit institutions.

"I think the legislators and I were somewhat in agreement we were not going to let the people of Western Pennsylvania live in the world of anxiety that they have lived in," he said. "And in keeping in mind that both of these institutions were non-profits that have received a great deal of benefit from that status."

Mr. Corbett said he could not answer questions about the details of the agreement because his role had been limited to bringing the two parties together to negotiate.

The deal covers Highmark Commercial and Medicare Advantage members.

The governor said the two parties will negotiate the terms of continued access by Highmark subscribers to UPMC's unique services, including Western Psychiatric Institute, some cancer services and community hospitals in Bedford and Venango counties.

Highmark has separate agreements with several UPMC facilities, including Children's Hospital of Pittsburgh of UPMC and UPMC Mercy.

The agreement comes little more than a year after negotiations broke down between the two health giants, with UPMC saying it would not negotiate with Highmark once it became known that the insurer intended to buy the financially-ailing West Penn Allegheny Health System and compete with UPMC in the health provider market.

Highmark said UPMC was asking for a 40 percent increase in reimbursement payments, but continued to say it wanted to continue negotiations.

Early in the dispute, UPMC signed contracts with four national insurers -- Aetna, United Healthcare, Cigna and HealthAmerica -- and encouraged Highmark subscribers to consider changing their insurance if they wanted to keep their doctor.

Those contracts reportedly contain more favorable reimbursement rates than UPMC had with Highmark, which may have put pressure on Highmark to soften its position.

For months the two sides could not even agree when terms of the current 10-year contract expired.

UPMC maintained the one-year run out period, which would go to June 30, 2013, applied only to hospital services but not services provided by UPMC physicians.

"The longer period of time was essential for Highmark [and] AGH, West Penn to get their legs under them, to survive," said Sen. Jay Costa, D-Forest Hills, who was involved in arranging the pact.

Competition between the two health care networks is important, but the community can't allow "one entity to compete with its hand tied behind its back," he said. "Folks still question the issue of whether or not these entities honor their mission. That's something that's going to linger as we go forward."

As part of the deal, Highmark will stop pushing for legislation that would have forced the two into binding arbitration. Highmark executives and lobbyists had been involved in what one senator called "a full-court press" for passage of such legislation in recent days.

Sen. Jim Ferlo, D-Highland Park, said that Highmark representatives were in Harrisburg on Tuesday, including vice president Deborah L. Rice and executive vice president Dan Onorato.

Mr. Ferlo said that Sen. Don White, R-Indiana, chairman of the banking and insurance committee, met with Mr. Corbett on Tuesday to talk about "trying to pound UPMC and Highmark into some kind of accommodation."

A source said that the contract extension will involve higher reimbursement rates for Highmark to pay, which is said to bring it more in line with the rates the commercial insurers are now paying.

UPMC has pacts with national insurers and did not want to undercut those by allowing Highmark to pay rates negotiated in 2002, which are believed to be 30 to 40 percent lower than those paid by the national firms.

"It's certainly important for Western Pennsylvania," said state Rep. Tony DeLuca, D-Penn Hills, minority chair of the Insurance Committee. "The fact is, we're talking about Highmark subscribers being able to use the 20 facilities and 3,000 doctors, which most of the people are worried about. They also, hopefully, within the three years, can get West Penn Allegheny on their feet and save 11,000 jobs. That's good news for the area, it's good news for the workers. It's good news for the Highmark subscribers."

In December, Mr. Corbett's office brokered an agreement that assured Highmark subscribers in-network access to UPMC physicians and hospitals through June 2013.

Highmark, meanwhile, has been rebuilding the West Penn Allegheny system, reopening the West Penn Hospital emergency department in Bloomfield and, in January, announcing a $20 million upgrade to the Forbes Regional Hospital campus in Monroeville.

Ratcheting up the stakes in the eastern suburbs, Highmark officials said in February that they would not sign a one-year agreement that would include in its network UPMC East, a new facility scheduled to open this summer less than two miles from Forbes Regional.

This agreement ends that threat along with Highmark's insistence that it would not allow its subscribers to go to the Washington Hospital urgent-care center joint venture with UPMC.

The agreement also is likely to end Highmark's federal lawsuit accusing UPMC of false advertising for its "Keep your doctor" campaign.

Mr. White also said that while the deal was important for Highmark, UPMC and West Penn Allegheny Health System, it was also important for the other commercial insurers in the area trying to get a toehold here but found themselves hamstrung by the more favorable reimbursement prices that Highmark was paying to UPMC's hospitals.

"I can't have Highmark enjoying the fruits of this very favorable contract" through the middle of 2013.

When the contract extension between Highmark and UPMC kicks in, Highmark will be paying higher rates, and the commercial insurers may be able to better compete, at least from a pricing standpoint.

Mr. White also said that he was concerned that a 2013 cutoff date, before Highmark had fully propped up the West Penn system, could have forced Highmark to more abruptly steer policyholders toward WPAHS, at the expense of other suburban hospitals.

While UPMC's system might have been able to absorb the loss of, say, 20,000 regular patients, he said, "if they take 2,000 from Excela, 1,000 from Indiana Regional, or Armstrong, I have problems. My hospitals have problems."

Neal Bisno, president of the Service Employees International Union division that represents healthcare workers, call the agreement "a good day for patients in Western Pennsylvania."

"This agreement will prevent the unnecessary disruption of care for millions of Highmark subscribers and is a critical step toward ensuring choice for health care consumers, he said. "We applaud UPMC and Highmark for reaching this important agreement and putting the needs of patients first. We also appreciate the efforts of our elected officials in Harrisburg to bring the two sides together.

"The next step to ensuring access to high-quality affordable health care for the region is for the PA Insurance Department to swiftly approve the affiliation between Highmark and West Penn Allegheny Health System. That affiliation will preserve 11,000 middle-class jobs and make sure that WPAHS thrives as a high-quality, cost-efficient health care provider for our community."

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Karen Langley: klangley@post-gazette.com or 717-787-2141. Bill Toland: btoland@post-gazette.com or 412-263-2625. Steve Twedt: stwedt@post-gazette.com or 412-263-1963. Rich Lord: rlord@post-gazette.com or 412-263-1542. First Published May 2, 2012 8:45 PM


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