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Highmark should be worrying about promoting its financially ailing hospital system

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Saturday, Nov. 2, 2013, 12:01 a.m.

Even though Highmark-owned hospitals continue to lose money at a fast clip, the state's largest health insurer appears determined to promote rival UPMC.

Say what?

Take a close look at the most recent Highmark ads that have been running on TV and in local newspapers. Highmark continues to demand a contract with UPMC so Highmark members can go to the very same UPMC facilities that compete head-to-head with the money-losing network Highmark purchased. You read that right: Highmark wants its members to be able to continue to get care at the competition.

This week, the Highmark-owned West Penn Allegheny Health System said it lost $137.6 million during the most recent fiscal year. That's on top of the $84.7 million it lost the year before. In 2011, it lost $51 million. And $92 million before that.

Competition and choice are perfectly understandable, but shouldn't Highmark be encouraging people to go to its renamed Allegheny Health Network hospitals so they start making a little bit of money?

The insurer's infatuation with UPMC points to the exceedingly fine line Highmark must walk as an insurer and provider. As an insurer, Highmark needs to offer choice to its members. Otherwise, Highmark members will switch to an insurer that provides a variety of health plan options, including access to UPMC. Besides UPMC's own insurance plan, other healthcare insurers in the Pittsburgh market have that access.

As a provider, however, Highmark has an obligation to steer patients to its facilities. It doesn't take a brain surgeon to understand that no patients = no revenue.

In its arguments to convince the public that the world will end without a Highmark-UPMC contract, Highmark asks: “Who built the UPMC hospitals? You did.”

Say what you want about the perpetually-tanned UPMC CEO Jeff Romoff, but he truly is the mastermind behind UPMC, along with the late Thomas Detre. They seized on the opportunity to build a hospital network and, while their motives have been criticized as profit-driven, they wildly succeeded. How? I could offer several theories, including their focus on organ transplantation, but it's easier to tell you how they didn't do it. They didn't do it using the same business model adopted by West Penn Allegheny. Otherwise, we would have two, not one, money-losing hospital chains.

Highmark says government or the courts need to stop UPMC from “limiting affordable access.” But the most relevant issue seems to be how is Highmark increasing affordable access? Highmark is building a hospital network presumably to do just that. It has at its disposal highly skilled workers and doctors who want the new Allegheny Health Network to prosper.

The solution to Highmark's financial burden lies not in providing access to UPMC, but in providing access to its own quality, affordable network. That is, after all, what former Highmark CEO Dr. Ken Melani had in mind when he set in motion the plan to build a hospital network. Melani, who was fired in April 2012 after his extramarital affair with a subordinate employee turned into a messy domestic disturbance, spoke many times about creating an affordable alternative to UPMC. All along, the grand plan was about steering patients to West Penn Allegheny — not UPMC.

Highmark leaders need to wake up to the reality that UPMC will likely never sign another contract. And no one should have to force UPMC to do so. Much like no one can force McDonald's to continue its decades-old relationship with Heinz ketchup.

The fries might not taste the same, but they will still be around.

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

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