Highmark offers olive branch on ads critical of UPMC

| Friday, Aug. 23, 2013, 12:01 a.m.

Highmark offered to end its controversial advertising campaign targeting UPMC if the hospital giant does the same and agrees to open negotiations on a long-term reimbursement contract.

The company's peace offer was made in a letter Chairman Robert Baum sent on Wednesday to state Rep. Tony DeLuca, D-Penn Hills. DeLuca wrote to the two feuding nonprofit health care giants last week and criticized the rash of negative ads blanketing Pittsburgh airwaves.

“We would be willing to alter and even to cease our public relations campaign if UPMC would agree to do the same and also to meet and discuss a long-term contract that provides affordable care to the entire community,” Baum wrote in the letter.

UPMC dismissed Baum's proposal, repeating its long-standing position that it cannot have a contract with a direct competitor that wants to shift UPMC patients to its own hospital system, Allegheny Health Network.

The advertising campaigns by the two companies, the latest twist in their bitter contract fight, focused on access for Highmark plan members to UPMC's doctors and hospitals and quality of care.

“There is nothing charitable about spending millions of dollars to scare the people of Western Pennsylvania,” DeLuca told Baum and UPMC Chairman Nicholas Beckwith in his letters.

In a response to DeLuca, Beckwith defended UPMC's ads, writing that the system “has worked very hard to ensure that everything said in our advertisements is not only accurate, but fair.”

When the reimbursement contracts between UPMC, the largest hospital network in Western Pennsylvania, and Highmark, the biggest health insurer in the state, expire at the end of 2014, UPMC will be out-of-network and more costly for Highmark members.

Highmark is pushing for a new contract so that it does not lose insurance customers to UPMC's health plan or national carriers Aetna, Cigna, United Healthcare and HealthAmerica, which was acquired by Aetna in May. Highmark contends that UPMC's refusal to renew the agreement means its plan members won't have the same access as they do now to UPMC facilities.

Baum argued in his response to DeLuca that UPMC should not “be allowed to, or have the power to, limit access for millions of people to facilities that have been built with community funds.”

UPMC has refused to consider negotiations because it believes Highmark will use a long-term contract to steer 41,000 patients away from UPMC, a move that would have a devastating financial impact on the owner of 20 hospitals. UPMC's earnings are being squeezed by higher expenses and lower reimbursements from the government and private insurers.

The financial challenge was evident in its latest results. The hospital system reported a net loss on Thursday of $57.2 million for the fiscal fourth quarter ended June 30. The loss — driven by negative returns from investments and a $55 million one-time charge related to Pittsburgh Promise contributions — widened from the same period last year when UPMC had a net loss of $13.4 million.

Chief Financial Officer Robert DeMichiei said the health system is operating on “razor-thin” margins.

For the year ended June 30, UPMC had an operating income of $187 million, a level DeMichiei described as “adequate for reinvestment, but it's not optimal.”

The system's one-time charge stems from an agreement it recently reached with the Pittsburgh Promise scholarship program, in which UPMC committed to contributing the remaining $55 million of its 10-year $100 million commitment to the program no matter how long Promise fundraisers take secure matching funds, DeMichiei said.

DeLuca, who on Thursday had not seen responses from UPMC and Highmark, said a large number of calls from his constituents complaining about the ads led him to write the letters.

“I don't mind that they're advertising, but these advertising dollars could be better spent on health care or lowering health care costs,” he said.

DeLuca's criticism of UPMC and Highmark follows a move by Republican Gov. Tom Corbett, who last week called on the companies to tone down their ad campaigns. He directed the Departments of Health and Insurance to create a task force to monitor the ads and look for ways to intervene if consumers are being misled.

Insurance Department spokeswoman Melissa Fox said task force members are being appointed, so the committee has yet to take action.

“At the governor's direction, the task force was formed basically just to review what's happening out in Western Pennsylvania to see where we can intervene,” Fox said. “The main goal is to make sure there's no more confusion than necessary.”

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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