West Penn director defends Highmark

| Wednesday, Sept. 14, 2011

Highmark Inc. was the "obvious choice" to save the struggling West Penn Allegheny Health System, David McClenahan said Tuesday at a state Senate committee hearing at the University of Pittsburgh.

McClenahan, a member of West Penn Allegheny's board of directors, said in prepared testimony submitted to the Senate Banking and Insurance Committee that Highmark was the only organization with both the financial resources to acquire the health system and the commitment to keep it intact.

Otherwise, he said, "In all likelihood, West Penn Allegheny would be taken apart, some assets would be preserved for their ability to generate revenue for the owners and many more programs and facilities ... would be shuttered." For instance, West Penn Hospital in Bloomfield would have closed without Highmark, which plans to spend up to $475 million to prop up Pittsburgh's second-largest health system, he said.

Officials with West Penn Allegheny have said little about the proposed acquisition since it was announced June 28.

The committee convened the hearing to learn more about the ongoing contract dispute between Highmark and UPMC and how it might affect health care consumers in Western Pennsylvania. Without a new contract, Highmark insurance subscribers might have to pay full price to see UPMC doctors or receive medical treatments at many UPMC hospitals.

Negotiations between Highmark and UPMC broke down earlier this year after UPMC learned that Highmark was considering an acquisition of West Penn Allegheny.

Their contract expires June 30, but a provision allows Highmark members to continue having in-network access at UPMC hospitals for one year afterward. People with Medicare coverage through Highmark are not affected. Children's Hospital in Lawrenceville, UPMC Hamot in Erie and UPMC Mercy in Uptown have separate contracts that don't expire for several years.

Highmark customers with UPMC doctors, however, might have to start paying out of pocket when the contract expires.

Highmark has said the one year run-out also applies to UPMC doctors, but UPMC has said it doesn't. State Insurance Commissioner Michael Consedine said yesterday during the hearing that his department is still trying to clarify the issue.

Consedine also testified that state law gives his department the ability to delay termination of the contract until April 2013. During that time, he said, the insurance department would attempt to get UPMC and Highmark negotiating again. It's in the "best interest of consumers," he said.

While some have speculated that Highmark is using West Penn Allegheny as a pawn in its negotiations with UPMC, McClenahan said he has confidence that the health system won't be left "at the altar."

McClenahan said he pressed Highmark executives and came away with "absolute certainty that they are firmly committed to this partnership."

McClenahan also said an eight- to 10-week deadline to reach a definitive agreement on the deal had passed but not because of any major roadblock. He said he expected the final agreement to be announced before the end of the month.

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