State Insurance Department questions Highmark's commitment to West Penn Allegheny Health System
Highmark Inc. can't have it both ways, state officials said on Friday.
The state's largest health insurance company is trying to rescue the nearly bankrupt West Penn Allegheny Health System at the same time that it's pursuing a long-term contract with West Penn Allegheny's chief rival, UPMC.
“This inconsistency brings into question Highmark's objective in pursuing this transaction and its long-term commitment to West Penn,” Stephen Johnson, the state's deputy Insurance commissioner, wrote to Highmark.
The problem, according to state Sen. Don White, R-Indiana County, who chairs the Senate Banking and Insurance Committee, is that Highmark cannot boost patient volume at West Penn Allegheny — key to turning around its finances — as long as insurance customers can choose to see UPMC doctors and be treated in UPMC hospitals.
“I'm concerned about the consequences a long-term insurance contract between Highmark and UPMC could have on Highmark's ability to execute the turnaround of WPAHS,” White wrote to Highmark CEO William Winkenwerder last week.
White's letter was attached to Johnson's letter, which the Insurance Department posted on its website. The department is reviewing Highmark's planned $1.2 billion acquisition of West Penn Allegheny, the linchpin in Highmark's plan to convert to a health system that competes with UPMC.
Highmark spokesman Aaron Billger said the health insurer believes it can fix West Penn Allegheny and have a contract with UPMC.
“We have long held to the fact that we believe that saving the (West Penn Allegheny) system is the right thing to do and that having a contract with UPMC is an imperative for the community,” Billger said.
UPMC spokesman Paul Wood said Highmark cannot contract with UPMC and fix West Penn Allegheny.
“The two things they want are not reconcilable,” he said.
The reimbursement contracts between UPMC and Highmark were set to expire June 30, which would make UPMC hospitals and doctors out-of-network to Highmark members. Last year, Highmark and UPMC negotiated an 18-month extension through the end of 2014.
Though lawmakers and many Pittsburgh health care consumers heralded that extension, some Highmark and West Penn Allegheny officials later acknowledged it further hurt West Penn Allegheny's finances.
The extension makes “the turnaround of WPAHS much more difficult, if not improbable,” Dan Lebish, an executive in the Highmark division building its health system, wrote in an email to colleagues when the company announced the extension. “I hope that I am wrong about all this, but I am really concerned we are just positioning ourselves for a very slow decline.”
Lebish's email was disclosed in a lawsuit between Highmark and West Penn Allegheny. Highmark sued in Allegheny County Common Pleas Court and won a judgment that kept the health system from talking to other potential buyers. West Penn Allegheny officials accused Highmark of trying to force the system into bankruptcy to cut its debt.
In his letter, Johnson asked Highmark to give the Insurance Department financial projections that make the assumption there is a long-term contract with UPMC. Highmark in January amended its financial projections assuming UPMC would be out-of-network at the end of 2014.
“Neither the department nor the public can assess adequately the Form A filing under the circumstances where Highmark is actively pursuing an extension of its contract with UPMC while not disclosing any financial projections showing what would happen if Highmark is successful in those efforts,” Johnson wrote.
Highmark has until March 8 to submit the projections if it wants “the department to continue its review of the proposed transaction in an expeditious fashion,” Johnson wrote.
Billger said Highmark is “compiling a response to the request.”
Alex Nixon is a staff writer for TribTotal Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.
Add Alex Nixon to your Google+ circles.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Consumer prices rose in April for 3rd straight month
- Stocks end quiet week with loss
- Murray, Alpha notify West Virginia coal miners of layoffs
- Developer hopes to make Allegheny Center a tech hub
- Murray Energy expects to lay off as many as 1,800 more
- Pa. sees widespread job gains; jobless rate holds at 5.3%
- BNY Mellon promotes executive
- BNY Mellon to pay $180M to end foreign-exchange lawsuit
- Wind energy muscled out of state market
- Retailers test high-tech upgrades to fitting rooms
- Fertilizer industry soars amid gas glut