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State Insurance Department questions Highmark's commitment to West Penn Allegheny Health System

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Friday, Feb. 22, 2013, 4:45 p.m.
 

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.

Turnaround difficult

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.

Financial projections

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 anixon@tribweb.com.

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