Highmark shells out $32M to amass property

| Thursday, July 19, 2012, 12:01 a.m.

The state's largest health insurer has spent $32 million in the past eight months quietly acquiring vacant land and commercial property throughout Western Pennsylvania as it pieces together a new $1 billion health care system.

Highmark Inc., using shell companies, has bought property in five municipalities, stretching from Cranberry in Butler County to South Strabane in Washington County, as it seeks to compete with rival UPMC and draw patients to a struggling hospital network the health insurer wants to buy.

Highmark officials declined to comment on specific plans, but it's likely the insurer will build outpatient medical centers on the properties, raising questions about duplicating medical services that increase the cost of health care.

Adding medical facilities — with extra beds, doctors and equipment — raises health care costs and can encourage over-treatment, experts have found.

The Congressional Budget Office reported in 2008: “Physicians are more likely to recommend hospitalization if beds are available.” Once a patient is admitted, it found, costs rise sharply with consultations, tests and surgeries.

And Highmark, a $14.6 billion enterprise with $4.1 billion in reserves, is probably not done acquiring property. Through a Cranberry attorney, it has formed more than a dozen shell companies for property acquisition. And it has said it plans to have 10 outpatient centers throughout the region.

“We have said publicly that keeping care in the community is an important part of our provider strategy,” Highmark spokesman Aaron Billger said. He declined to offer further details.

Highmark's $475 million deal to buy West Penn Allegheny Health System awaits state approval. Key to turning around the system's finances will be increasing patient volume, experts have said. A network of outpatient medical centers, which house diagnostics, imaging, physician offices, surgery centers, pharmacies and other services, in suburban areas can pull new patients into the system.

Properties add up

Newly uncovered property purchases by Highmark came in January in South Strabane, adding to acquisitions in Cranberry, Pine, Ross and Monroeville.

A company named Silver Rain made two property buys totaling $2.7 million on Washington Road in a busy commercial area just north of Interstate 79. Silver Rain is a Highmark subsidiary, states a recent Highmark filing with the state Insurance Department.

Silver Rain bought a 4.6-acre wooded lot from former Jeep and Chrysler dealer Chester “Bo” Corwin and his siblings for $1.5 million and an adjacent former animal hospital property from Andrew Uram for $1.2 million, Washington County deeds show.

The property is across the road from a MedExpress Urgent Care center, the registered address for Silver Rain, according to state records.

Silver Rain was a property-acquisition subsidiary of MedExpress, a Morgantown, W.Va.-based owner of urgent care centers in Western Pennsylvania, West Virginia and other states. Highmark purchased Silver Rain from MedExpress, Billger said.

UPMC operates a cancer-treatment center in nearby Washington Hospital. UPMC and Washington Hospital also are collaborating on building jointly operated urgent care centers in Washington County.

Not counting Highmark's $2.7 million purchase of the Benedictine Sisters of Pittsburgh's monastery in Ross last spring, other Highmark property acquisitions also are near existing UPMC facilities.

In Cranberry, Highmark paid $8.9 million for 25 acres in the Cranberry Woods office park. The site is just east of UPMC Passavant, across I-79. UPMC also is negotiating to buy land near the office park for a sports medicine facility that would be used as a training facility by the Penguins.

In Pine, Highmark has assembled more than 35 acres and an office building on Copperleaf Court, off Route 19. UPMC has an urgent care center and several physician offices nearby.

And in Monroeville, where the $250 million UPMC East opened this month about a mile away from West Penn Allegheny's Forbes Regional Hospital, Highmark also has purchased commercial property.

Pennsylvania ranked fourth among states last year in a Tribune-Review study of U.S. hospital public bond financing for construction, refinancing, equipment and other expenses. Nationwide, hospitals borrowed $144 billion over 34 months from January 2008 to November, the Tribune-Review's yearlong series “Code Green: Bleeding Dollars” found.

Like the top two states in the analysis — California and Texas — Pennsylvania no longer has a so-called certificate of need process in which health care companies must obtain state approval to build facilities or purchase major equipment. Following the series, some state lawmakers called for renewing the state's certificate of need law, and state Sen. Jim Ferlo, D-Highland Park, introduced legislation in March.

No one at the national level — or even on a state-by-state level — tracks health care need and matches that to available services, said Dr. Albert Wu, professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health in Baltimore.

Staff writer Andrew Conte contributed to this report. 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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