Highmark, UPMC extend pact for year

| Friday, Dec. 23, 2011

The threat of government intervention in the months-long stalemate with Highmark Inc. led UPMC to back off its plan to terminate contracts between its 3,000 doctors and the state's largest health insurer, lawmakers and others said on Thursday.

In a deal that Gov. Tom Corbett brokered with the help of a mediator, UPMC announced in a joint statement with Highmark that it would extend physician contracts for an extra year to June 30, 2013, the day contracts for most UPMC hospitals are set to end.

But Western Pennsylvania's largest hospital system still says it will end its business relationship with Highmark and the insurer's 2 million commercial customers in the region.

"This date certain provides 18 months for UPMC patients and Highmark subscribers to review the multiple competitive health insurance options now available to assure that their care will continue uninterrupted with UPMC physicians and hospitals," the health system said.

The delay gives regulators time to review Highmark's proposed acquisition of West Penn Allegheny Health System, UPMC said. UPMC has refused to negotiate with Highmark since spring, when the insurer began pursuing the $475 million buyout of the financially troubled and smaller competitor to UPMC.

Calling the extension a baby step, lawmakers pledged to continue pushing for a contract giving Highmark members in-network access to UPMC.

House Majority Leader Mike Turzai, R-Bradford Woods, urged the state Senate to quickly pass a House bill that could require UPMC and Highmark to enter binding arbitration. Turzai said he believed the bill "put significant pressure" on UPMC to agree to the extension.

Sen. Don White, R-Indiana, emphasized that many questions remain unanswered.

"I'm not looking at this as victory," said White, chairman of the Senate Banking and Insurance Committee. "This is strictly a time-out that gives us a little more time before anybody is pushed down the edge of a cliff."

White and Sen. Jay Costa, D-Forest Hills, sponsored a bill that would give the state Insurance commissioner authority to delay by up to three years the termination of contracts between insurers and health systems.

White expressed mixed opinions about forcing private companies to do business with one another. He said patients' needs may need to come first.

"They're nonprofits, and they need to start remembering that," he said.

Attorney David Simon, who served on Corbett's transition team and as general counsel to the state Insurance Department, handled the mediation sessions Corbett brokered. Simon, a senior vice president and general counsel for Jefferson Health System in Philadelphia, did not return a call seeking comment.

Kevin Harley, Corbett's spokesman, would not say how many times Simon met with the feuding parties over the past week to produce the extension agreement. Corbett has said he met with the chairmen of the boards of Highmark and UPMC in recent months.

The governor remains hopeful that Highmark and UPMC will reach a long-term agreement, Harley said.

"If they can't, the state may have to step in," he said.

Highmark, which continues to advocate for a long-term contract with UPMC, thanked lawmakers.

"Actions by the Pennsylvania House of Representatives and state Senate have been instrumental in achieving this result on behalf of Highmark members and UPMC patients," the insurer said.

Several companies cheered the extension, said Norm Kerr, a principal in Buck Consultants Inc.'s health and productivity practice, Downtown. Kerr, who relayed the news to clients, said many called it a "welcome Christmas present."

Kerr said few of his clients switched from Highmark to one of five insurance carriers that offer full access to UPMC for the coming year because they figured a compromise would come along.

A contract is not likely without lawmakers getting involved, Kerr said, and UPMC probably conceded to the extension to "get some good will with the legislators."

"They probably did this because they figure it would be forced on them," he said.

Westinghouse Electric Co. in Cranberry, which offered Highmark and Aetna insurance to its more than 4,000 employees in Western Pennsylvania this year, is pleased with the extension but would prefer a long-term contract, spokesman Vaughn Gilbert said.

"It is also a shame that this agreement comes at the 11th hour, well after the next-year enrollment periods for many companies and organizations have ended," Gilbert said. "We also believe strongly that it should not have taken the threat of government intervention to drive the parties back to fruitful discussions."

Additional Information:

Healthy competition

-- UPMC has 19 hospitals, 3,000 physicians, and about 60 percent of the market for in-patient medical procedures.

-- Highmark, the state's largest health insurer, provides coverage to about 2 million people in Western Pennsylvania. The number excludes people with Medicare, Medical Assistance or CHIP coverage, which the two nonprofit organizations said would not be affected by the dispute.

-- The extension covers UPMC physician contracts, which will end June 30, 2013, the same day as hospital contracts.

-- Starting July 1, 2013, Highmark commercial members seeking treatment at UPMC would pay more expensive out-of-network rates.

-- House Bill 2052, which could force the organizations into binding arbitration, awaits Senate consideration.

-- Senate Bill 1358, which would allow the state Insurance commissioner to delay the contract terminations by up to 36 months, is before a committee.

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