For Highmark Inc., the price of temporary peace with UPMC was an increase in the amount of money paid out to UPMC hospitals for the work they do. But it could cost Highmark even more when other physicians and hospital networks see UPMC getting a big increase in reimbursement money and ask for the same.
Whether any of them will get it, though, is a matter of debate.
The Highmark deal with UPMC announced last week could mean "a huge fee schedule adjustment for everybody," according to one industry observer with knowledge of the Highmark-UPMC negotiations. And, "When there is an increase [for one group of] physicians, you have to do it across the board."
Highmark disputed that characterization. "Highmark's fee schedule will be the same for all physicians, including UPMC physicians," said Michael Weinstein, company spokesman. "Under the agreement-in-principle announced last week, Highmark will provide an annual payment increase to UPMC, but Highmark's reimbursement levels will be well below UPMC's payment demands and less than what is being paid by commercial insurance carriers."
The deal allows Highmark commercial policyholders access to all UPMC physicians and hospitals through Dec. 31, 2014. Highmark will pay higher rates to UPMC over the next two years, and will allow its policyholders to access UPMC East, the health system's new Monroeville hospital.
Highmark, in return, gets extra time to bolster the finances and customer base of its proposed provider partner, West Penn Allegheny Health System, and it's also able to bring new insurance products to market.
Still, at its core, this contract is about money. And the increased UPMC payout puts Highmark in a difficult political situation with its other in-network providers, if not an unfamiliar one.
A decade ago, when Highmark struck a 10-year reimbursement deal with UPMC, some observers at the time said it was a sweetheart deal, one that might stoke envy among other providers in the region -- including West Penn Allegheny Health System.
The smaller health system years later filed an antitrust suit against Highmark and UPMC, accusing them of colluding to squeeze it out of the market with preferential payments to the larger UPMC.
One difference this time around is that Highmark has more competition from other commercial health insurers. Another difference -- arguably, a bigger one -- is that Highmark, 10 years ago, was not embarking on a paradigm-shifting strategy, trying to acquire hospital systems and physicians practices to compete with UPMC.
If UPMC-affiliated physicians see more money, Highmark may find other physicians -- independent, or affiliated with other hospitals -- will want a revised fee schedule, too.
If they don't get one, it could give UPMC an advantage. The larger health system could swoop in and urge independent doctors to affiliate with it, making the case that doctors at other systems are being under-reimbursed.
"It hurts John Paul" as he tries to woo physicians to Highmark's new provider subsidiary, one observer said. John Paul is the former UPMC executive who now runs Highmark's health provider division.
Others said it's not that simple, largely because UPMC's physicians are employed in-house with salaries and bonus marks that are set by contracts with the health system.
No matter what Highmark has agreed to pay under the new contract, any extra money would not necessarily go to the doctors themselves, but instead would go to UPMC, which in turn pays the doctors.
Generally, UPMC employs doctors in one of two groups -- UPP, which stands for University of Pittsburgh Physicians, or the UPMC Community Medicine group. Most get a set salary, as well as bonuses tied to productivity. For example, if they bill for a certain number of procedures or "work relative value units," they can get a bonus.
A minority of UPMC-employed physicians have incentive arrangements tied to total collections, instead of productivity or "units" of care. Under that scenario, a physician could see a raise.
If Highmark is now paying out more per procedure, the physician's total collections would likely go up, increasing the odds he or she could hit the collection bonus threshold.
Mike Cassidy, a health law attorney with Tucker Arensberg, said it is not in UPMC's nature to reopen contracts with physician groups. UPMC's "history has not been, 'We have more money, [so] we're going to give them more money,' " he said.
But even if UPMC physicians were in line for a raise, Jan Jennings, president and CEO of Downtown's American Healthcare Solutions, said he doubted that UPMC is about to embark on a hiring or physician-poaching binge.
"UPMC is fully staffed. They have 3,200 employed physicians. They have all the physicians they need," he said.
He also said Highmark, if its track record is any indication, would be able to withstand the pressure from other hospitals and doctors to provide across-the-board rate increases.
Highmark is still the biggest health insurer in town, and it still delivers a high volume of commercially insured patients to providers, he noted.
Additionally, hospitals and physicians groups are separate animals, said Jim McTiernan, principal with Triad USA, a Downtown benefits brokerage. Community hospitals -- while they may be envious of UPMC's pay raise -- have complicated reimbursement methodologies, based on a variety of factors, including volume, case complexity and so on.
In other words, while there may be a reimbursement disparity, it's harder for hospitals to protest.
Still, it couldn't hurt for hospital systems to come knocking at Highmark's door, said Jack Krah, the executive director of the Allegheny County Medical Society, even if they face an uphill battle in reopening their existing reimbursement contracts.
"I would think that if I were the CFO or CEO of another hospital, I'd be calling Highmark to say we'd like to re-examine our contract, too," he said.
One way for Highmark to wiggle out of this squeeze is to convince non-UPMC hospitals and practices that they can make up the pay gap by keeping their patients healthier -- known as pay-for-performance, or outcomes-based care, said Tom Tomczyk, principal and health expert with Buck Consultants.
"They would say, 'Yeah, [UPMC gets paid more], but we're trying to revise the way we reimburse our physicians," he said. "That's the way Highmark can get around this. ... 'If you perform, you're going to get it.' "
If they get it, consumers end up paying for it. Pittsburgh-area patients and employers might have wished for this truce, but, Mr. Tomczyk said, "Be careful what you wish for. The costs are really going to increase."region - health
Bill Toland: email@example.com or 412-263-2625. First Published May 8, 2012 4:00 AM