UPMC, Highmark contract in jeopardy
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The chief financial officer for the University of Pittsburgh Medical Center said Thursday that he did not expect the region's largest health system to renew its contract with Highmark when it expires next year, based on the Pittsburgh insurer's statements that it might enter the local provider market by affiliating or acquiring the West Penn Allegheny Health System.
"We are preparing to compete. That's what we're doing," said Robert DeMichiei. Because of the growth of its own insurance plan, UPMC Health Plan, Mr. DeMichiei said the health system's officials believe that they have the ability to compete successfully.
The comments came as insurer Aetna announced it had reached an agreement with UPMC that will include all UPMC hospitals and affiliated physicians in its Western Pennsylvania network for the first time since 2001. That will add about 1,700 primary care and specialist UPMC physicians to the Aetna network, in addition to the 1,200 its members currently have access to.
UPMC Health Plan has more than 1.5 million members and accounts for more than one-third of the health system's total revenues, Mr. DeMichiei said, during a quarterly briefing about the health system's finances at its offices in the U.S. Steel Tower on Thursday. UPMC officials say the insurance coverage is accepted by 98 percent of the region's hospitals and 94 percent of the region's physicians.
Highmark covers 4.8 million policyholders.
This is not the first public volley between the two health care giants as they enter the final year of a 10-year reimbursement agreement.
Last month, Highmark Inc. CEO Kenneth Melani said the insurer would be open to partnering or buying West Penn Allegheny if contract talks with UPMC were unsuccessful, a move that would put the insurer in direct competition with UPMC as a provider of health care.
Highmark spokesman Michael Weinstein on Thursday said the insurer "has and will continue to seek to negotiate new contract terms with UPMC, but to date UPMC has refused to do so."
Regardless of whether an agreement with Highmark is reached, said Mr. DeMichiei, "it will be a different market. It will be a market with a lot of choices," with additional insurers such as Cigna and UnitedHealthcare in the mix.
In financial results released Thursday, UPMC reported that it generated $313 million in operating income through the first nine months of the current fiscal year ending June 30, compared with $179 million for the same period a year earlier. That figure includes $5.83 million in outpatient revenue, a 22 percent increase from the previous year.
UPMC recently made Hamot Medical Center in Erie part of its holdings, which significantly contributed to operating income.
First Published May 6, 2011 12:00 am
