Healthcare Matters

Editors Note: This is a fifth installment in a series of posts covering the ongoing and very public dispute between UPMC, one of the nation’s largest IDNs and Highmark, one of the nation’s larger insurers. Both based in Pittsburgh, they each hold near regional monopolies for their core services.  And that might work if each weren’t determined to get into the others business. The problem in Western Pa. is not unique, so it’s newsworthy for that reason alone, but it’s playing out at a scale and in a fashion in Pittsburgh that soap writers would dismiss as too far fetched.

Previous posts in order:

• Payers and Providers Battle in Pittsburgh –Payer favored by 6
• Highmark and UPMC Pull Out the Heavy Artillery and No One is Blinking
• UPMC and Highmark Inviting Government Intervention
• UPMC/Highmark Battle Takes New Turn –Jerry Springer Headed for Pittsburgh

And now the latest: Well, it certainly aint over, but the UPMC/Highmark battle we’ve been covering for the past year is at a cease-fire –albeit a temporary one.  Keep in mind, these giants (Western Pennsylvania’s dominant healthcare provider and the same region’s dominant insurer) couldn’t even agree on when their contract expired, so any form of “treaty” has to be considered real progress. Not quite sure? Just ask the region’s local and state politicians; they’ll tell you.

Highmark subscribers who, with good reason, have been horrified at the potential of being kicked out of UPMC’s network in 2013 can relax for at least one additional year. Their in-network access is now guaranteed through 2014. What happens come January 1, 2015, however, remains anyone’s guess, but the logical outcome would be a Highmark deal with UPMC that provides UPMC with reimbursement rates that are competitive with the other insurance carriers that are part of the UPMC network.

Briefly, the problem is all about Highmark’s decision to purchase a smaller, dying-on-the-vine, but geographically competitive hospital system in UPMC’s own backyard (i.e. Western Pennsylvania Allegheny Health System). And as you might guess, UPMC didn’t appreciate the move. Highmark’s timing was terrible. Highmark made its deal with WPAHS during its contract re-negotiations with UPMC. Kind of like denying infidelity to your wife with your girlfriend sitting next to you in the car.

UPMC feels special. It has busted its tail over the last 20 years and built a very successful IDN –a virtual monopoly– in the region. Therefore, it believes it is entitled to keep it that way. Now the rest of us don’t necessarily connect those dots, but UPMC does. Like Highmark, it also has an insurance company and significant for profit interests throughout the world, but it wrote off WPAHS as a place to buy spare parts a long time ago. It not only fears a Highmark-backed competitor, it’s indignant about the possibility.

Fair minded business people find UPMC’s “entitlement mentality” and/or its “take my ball and go home” attitude a little much. Couple that with an idea among the gun slinging, Bible toting sensibilities of Western Pennsylvanians that not-for-profits should be held to a slightly higher standard of behavior, and what do you get?  You get the region’s largest employer squarely at odds with the local communities at whose convenience it is supposed to serve.

In the end, the politicians successfully threatened these two non profits by reminding them of the potentially fleeting value of their tax exempt status and even worse –binding arbitration.  So they finally came together with a temporary settlement. But that’s not all. Jeff Romoff, UPMC’s CEO, is no longer forced to sit across the table from his former nemesis, Ken Melani (Highmark’s former CEO). Whether Mr. Melani stepped or fell on his own sword is already old news. The point is, Mr. Romoff is now the city of Pittsburgh’s undisputed kingpin. And that recent development, courtesy of Mr. Melani’s myriad indiscretions, may actually help expedite a more permanent solution, if it already hasn’t.

Has the can been kicked down the road far enough for politicians to feel a sense of relief?  They’re hoping the issue has assumed “out of sight out of mind” status with local voters. Best guess: With Melani gone and former UPMC senior executive John Paul now leading HighMark’s provider division, look for some significant movement –one way or the other. Romoff and Paul not only know each other very well, but they know the ropes better than any of the politicians who naively think they’re going to direct the eventual outcome.

—Tom Finn