Highmark issues rosy West Penn prognosis
By Alex Nixon
Published: Wednesday, March 13, 2013, 12:01 a.m.
West Penn Allegheny Health System would return to profitability next year, according to financial projections Highmark Inc. filed with the state Insurance Department, a scenario that appears more optimistic than the insurer previously stated.
Highmark said that keeping UPMC in its network of medical providers would “not deter or harm the turnaround” of struggling West Penn Allegheny, which it is planning to acquire as part of a strategy to build a health system to compete against UPMC.
State officials last month raised concerns about Highmark's proposed acquisition of West Penn Allegheny. The Insurance Department, which needs to approve the deal, questioned whether Highmark could fix West Penn Allegheny if the insurer extended its relationship with UPMC beyond the end of 2014.
“Highmark believes that the data it has submitted to the PID (Pennsylvania Insurance Department) proves that its plan for restoring WPAHS to financial health is achievable, with or without a UPMC contract, and that a UPMC contract ensures a stronger Highmark,” the insurer said in the filing made public on Monday.
With Highmark members able to continue accessing UPMC hospitals and doctors after 2014 — when current contracts expire — West Penn Allegheny's revenue would skyrocket to an estimated $1.8 billion in 2014, up 69 percent from $1.1 billion projected for this year, the filing said. It would swing from a net loss of $43.6 million estimated for this year to a net profit of $4.8 million in 2014 and balloon to $113.8 million in 2015.
The return to profitability in 2014 is a year sooner than Highmark told the department in a January filing, which assumed that it didn't extend its contracts with UPMC.
Highmark Chief Financial Officer Nanette DeTurk said last month that the turnaround could take even longer — up to five years — if Highmark were able to extend the UPMC contracts.
That statement was backed up in the latest filing, which stated: “Even in a scenario which posits that UPMC remains in Highmark's network, the turnaround of WPAHS will occur, albeit at a slower pace.”
Yet the statement appears at odds with the numbers provided to the department, which show West Penn Allegheny turning a profit as early as next year.
Highmark spokesman Aaron Billger declined to comment and said DeTurk was not available.
Highmark detailed year-by-year growth in revenue and profit at West Penn Allegheny from 2013 to 2016 in the latest financial projections.
The January filing, which uses the assumption that Highmark members will not be able to access UPMC after 2014, does not include comparable yearly financial projections. The Insurance Department does not have them, and Highmark declined to provide them.
State Sen. Don White, a Republican from Indiana and chairman of the Senate Banking and Insurance Committee, echoed the Insurance Department's concerns last month. In separate letters to Highmark, Deputy Insurance Commissioner Stephen Johnson and White questioned how the insurer expected to boost patient volume at West Penn Allegheny if its members could continue accessing UPMC, the largest network of hospitals and doctors in Western Pennsylvania.
Insurance Department officials declined to comment. White could not be reached for comment.
“Highmark's latest filing is less about saving West Penn than it is about Highmark ensuring its domination of the market to the detriment of competing health insurers, community hospitals and UPMC,” UPMC spokesman Paul Wood said.
UPMC has said it will not renew contracts with Highmark because the insurer will harm UPMC financially by steering patients to West Penn Allegheny.
The contracts are considered essential to Highmark's ability to retain and grow its base of insurance customers. Patients could leave Highmark for other health insurers that have access to UPMC, which owns 19 hospitals and employs more than 3,300 doctors in Western Pennsylvania.
According to Highmark's projections, its insurance revenue in 2015 would be $16.8 billion if it lost UPMC contracts. With the contracts, 2015 revenue would be $18.2 billion.
Highmark said that with UPMC, it would increase patient volume at West Penn Allegheny by 46 percent over five years — from 57,000 patients a year to 83,000 by 2017.
If the increase occurred as Highmark expects, volume would exceed 2008 levels, when West Penn Allegheny hospitals treated 77,800 patients.
Wood noted that UPMC on average treats about 30,000 to 35,000 Highmark members a year.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
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.
- PNC posts 7 percent rise in 1Q profit
- Heinz offers Pittsburgh workers a buyout if they are unhappy
- Programs help to nudge unemployment among veterans downward
- Coca-Cola revenue up, but soda sales dip
- Fed chair might push for stronger regulations
- Consumer price index up 0.2 percent in March
- Tobacco companies make payments under state settlement
- Recall puts GM sales under microscope
- Google buys drone maker Titan Aerospace to spread Internet
- Robinson bakehouse invests time, love in artisan products
- Koppers to acquire 2 Buffalo-based Osmose units for $460M