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Insomnia plagues Highmark's health care deal with West Penn Allegheny Health System

Luis Fábregas
| Monday, March 18, 2013, 10:28 a.m.

Just when it appeared Highmark's acquisition of West Penn Allegheny Health System was sailing toward approval — boom! — along come state Department of Insurance regulators telling us things aren't so smooth after all.

Let's call this latest chapter “Insomnia” because it's safe to say Highmark executives aren't getting much sleep roughly 15 months after optimistically announcing an agreement to buy the ailing parent of Allegheny General Hospital.

The state Insurance Department is now questioning how Highmark can boost falling admissions at the West Penn Allegheny Health System it wants to buy while hanging onto a contract with UPMC. Admissions at West Penn Allegheny's five hospitals have taken a nosedive in the past five years, and UPMC estimates its rival will need at least 25,000 admissions to get back up to profitable levels. That's roughly a 40 percent increase over current volume and, frankly, a tall order.

Now Highmark, which for years has controlled the health insurance market in Western Pennsylvania, is not so sure it wants to part ways with UPMC. Without a new contract with UPMC after the current one expires at the end of 2014, Highmark officials say the insurer will be weakened. To which I say, no kidding.

If Highmark ditches UPMC, the insurer faces the colossal challenge of filling beds in its soon-to-be-created hospital network.

UPMC, meanwhile, wants no part of a contract with Highmark for obvious reasons. Why would UPMC want to ink a deal with an insurer that could potentially steer its patients to rival West Penn Allegheny hospitals?

Highmark is making a noble attempt to rescue a much-needed West Penn Allegheny system. I've said it many times before: Health care consumers in Western Pennsylvania deserve two competing health care systems so we can freely choose where to get care.

The latest curve ball means Highmark and West Penn Allegheny seem to be no further along in solving their problems than they were two years ago. Remember, a Highmark-UPMC contract means those insured by Highmark would be able to go to UPMC and not West Penn Allegheny, where Highmark presumably wants them to go. Sounds like a fair question from the state.

Even if Highmark provides the right answers and the state Insurance Department approves the deal, what happens two, three, four years down the road? Will UPMC cave in and sign a contract with Highmark? That's doubtful. UPMC has its own insurance brand and has struck a deal with four national insurers. UPMC officials seem to be happy with chipping away at Highmark's market share.

With so many unanswered questions, only one thing remains for Highmark to do: Use the talent and quality of West Penn Allegheny workers and doctors to your advantage. Show us why, given the choice between UPMC and West Penn Allegheny, we should pick the latter. Show us that you can provide better care, better outcomes. Show us why the public should help you fill your beds.

The Insurance Department is right to ask questions, but it needs to move quickly. This deal needs to be approved, not because we have Highmark fatigue, but because there are thousands of West Penn Allegheny workers eager to duke it out with UPMC. Now that's a movie I don't want to miss.

Luis Fábregas is a staff writer for TribTotal Media. He can be reached at 412-320-7998 or

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