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Highmark: We need contract with UPMC

| Tuesday, Feb. 26, 2013, 12:01 a.m.
Highmark Inc., the state’s largest health insurer, is asking the state Insurance Department to approve a 10 percent raise in the base rate it uses to set premiums for about 27,800 members insured through small businesses. File photo

Highmark Inc. executives acknowledged on Monday that a long-term contract with UPMC is essential to providing more than $1 billion to establish a competing hospital system with struggling West Penn Allegheny Health System.

Chief Financial Officer Nanette DeTurk said the pursuit of a contract with UPMC means it could take Highmark twice as long to return West Penn Allegheny to profitability if Highmark members can continue accessing UPMC facilities after the end of 2014, when current reimbursement contracts end.

The statement appears to support questions raised by the state Insurance Department, which is reviewing Highmark's plan to buy West Penn Allegheny, and state Sen. Don White, an Indiana Republican who chairs the Senate's Banking and Insurance Committee.

The insurance department on Friday questioned Highmark's ability to turn around West Penn Allegheny while pursuing a new contract with UPMC that allows the insurer's members to obtain treatment from the health system.

Highmark filed a response to state insurance regulators, assuring them a UPMC contract would not detract from its takeover of West Penn Allegheny. Highmark did not include financial projections the Insurance Department requested, but said it would do so by a March 8 deadline.

In a conference call with DeTurk, Highmark Chief Legal Officer Thomas VanKirk told reporters that more important than the speed with which Highmark turns around West Penn Allegheny is maintaining Highmark's financial strength.

“It is the enterprise financial viability that we're interested in,” said VanKirk.

Without a long-term UPMC contract, Highmark's insurance business, which is providing more than $1 billion to set up a hospital system to compete with UPMC, could be weakened, he said.

The length of time it takes to return West Penn Allegheny to profitability is “irrelevant” as long as the overall system — including Highmark's insurance business, West Penn Allegheny and other medical providers — remains strong, VanKirk said. Key to keeping the enterprise financially strong is not losing Highmark customers who might choose UPMC, the dominant medical provider in Western Pennsylvania.

In a letter to Highmark released Friday, White expressed concern “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 said Highmark won't be able to boost patient volume at the five-hospital West Penn Allegheny — essential to turning around its finances — as long as insurance customers can choose UPMC, which employs more than 3,300 doctors and owns 19 hospitals.

UPMC has said it has no interest in another contract with Highmark as long as the insurer intends to go into the hospital business.

UPMC maintains there's no way Highmark can succeed in fixing West Penn Allegheny when its insurance members have the option of choosing UPMC.

DeTurk said Highmark is designing insurance plans that — over time — would show customers West Penn Allegheny can provide less expensive and higher quality care than UPMC.

“That will be a big driver of folks back into the system,” she said.

West Penn Allegheny officials declined to comment.

“It's not UPMC's responsibility to solve Highmark's problems,” UPMC spokesman Paul Wood said.

UPMC insisted on an end to its contracts with Highmark because it's self-defeating to allow the insurer to profit on access to UPMC while building a competing health system.

“It's a bait-and-switch,” Wood said of Highmark's strategy of being able to sell plans that include UPMC, but then steer patients to West Penn Allegheny.

“They would flash access to UPMC,” he said. “But when the time comes that you need UPMC care, Highmark gets to tier and steer you away from UPMC and into West Penn.

“They have to do that in order to save West Penn, in order to give West Penn the volume they need.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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