Hospital system and insurer end long battle by reaching deal

Highmark and UPMC’s new contract comes even after the insurer announced it would buy a rival health system.

By — Posted July 25, 2012

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A sometimes bitter contract dispute was resolved July 3 when western Pennsylvania’s largest insurer finalized a deal that will give Highmark members access to University of Pittsburgh Medical Center physicians and facilities through at least 2015.

The two sides had agreed in principle during arbitration in May organized by Pennsylvania Gov. Tom Corbett.

Without the deal, Highmark members would have lost network access to some UPMC facilities and 2,700 physicians this year.

“The immediate reaction from the medical community, for patients as well as probably from the two entities was a giant sigh of relief,” said Leo McCafferty, MD, a plastic surgeon in Pittsburgh who is chair of the Allegheny County Medical Society and president of the American Society for Aesthetic Plastic Surgery. “I think the important takeaway is that this is still a community that cares about patients.”

Highmark won’t pay UPMC as much as the hospital system demanded — UPMC reportedly wanted a more than 40% increase. But Highmark will raise payments each successive year under the new contract. Highmark spokesman Michael Weinstein said the insurer’s fee schedule for physicians will remain the same for UPMC as for all other network physicians.

The long battle between the hospital and health insurer mirrored disputes around the country, with each side painting the other as abusing its market power. Both launched public relations campaigns to pressure the other party and keep their customers from abandoning them.

Typically in hospital-insurer disputes, the insurer or the health system is larger or has greater market share. Pittsburgh is unique in having two evenly matched giants battling over the health care market.

UPMC holds a 55% share of the area’s hospital market. Highmark holds between 60% and 80% of the health insurance market.

Both companies released statements that referenced the need for more robust competition in the other side’s market. Whether that competition develops will depend on the success of UPMC’s health insurance plan and the approval by regulators of Highmark’s purchase of the struggling West Penn-Allegheny Health System, which would create competition for UPMC. The smaller hospital system had been on the brink of financial disaster before Highmark agreed to buy it.

A corporate statement from UPMC said, “In the wake of the Supreme Court’s June 28 decision upholding the Affordable Care Act, this agreement creates a foundation for increased competition in the health insurance market with the UPMC-UPMC Health Plan integrated delivery and financing system, the Highmark-WPAHS integrated delivery and financing system and the four national insurers [Aetna, Cigna, HealthAmerica and UnitedHealthcare] competing on the basis of quality, cost and network access, all to the benefit of patients, subscribers and businesses in western Pennsylvania.”

Highmark released a statement that said it will continue work on creating “an alternative integrated delivery and financing system for the region aimed at improving coordination of care, making health care more affordable and providing a better patient experience.”

Highmark will drop a lawsuit it filed against UPMC over its advertisements during the contract dispute that suggested UPMC patients change insurers to keep in-network access to their doctors, Weinstein said. He said the insurer also intends to drop its antitrust lawsuit against UPMC whenever the acquisition of WPAHS is complete.

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