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Health system's lawsuit to go ahead

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Tuesday, Oct. 4, 2011

A federal antitrust lawsuit over competition among Pittsburgh's health care giants will proceed now that the U.S. Supreme Court on Monday declined to take the case.

West Penn Allegheny Health System filed the lawsuit in April 2009 alleging competitor UPMC and insurance giant Highmark Inc. conspired to monopolize the health care market and drive the struggling hospital system out of business.

The case will return to U.S. District Judge Arthur Schwab, who in October 2009 dismissed it. West Penn Allegheny appealed the decision, and the 3rd Circuit Court of Appeals last year overturned Schwab's dismissal. In January, Highmark and UPMC filed separate appeals of that decision to the Supreme Court, which declined to hear them.

UPMC said in a statement it was disappointed the court would not review the case. But, health system officials questioned the future of the lawsuit considering Highmark is poised to acquire West Penn Allegheny in a $475 million deal.

"Given Highmark's recently announced plan to acquire West Penn Allegheny, however, those allegations have even less credibility now than when they were first raised more than two years ago," UPMC said. "UPMC looks forward to presenting the facts in U.S. District Court."

West Penn Allegheny spokeswoman Kelly Sorice said the health system doesn't comment on pending litigation. Highmark spokesman Michael Weinstein did not respond to a request for comment.

Schwab will have to take up a case he once dismissed. But it's not unusual for federal judges to have their dismissals overturned, said Arthur Hellman, a University of Pittsburgh law professor.

"It's just part of the day-to-day work of being a federal judge," Hellman said. "Sometimes a higher court disagrees."

In 2009, Schwab said West Penn Allegheny's lawsuit was "long on innuendo" but "short on any plausible facts" in tossing the case. But the appeals court disagreed, stating that the health system's claims might have merit.

"Viewed as a whole, these allegations plausibly suggest that UPMC has engaged in anti-competitive conduct, that UPMC has competed with West Penn on some basis other than merits," the 2010 appeals court decision stated.

"Whether or not it's plausible is something that reasonable judges can disagree on," Hellman said.

West Penn Allegheny alleged that UPMC charged Highmark less than other insurers for medical procedures in exchange for Highmark paying UPMC better reimbursement rates than other hospital systems.

West Penn Allegheny lost $48.8 million from operations in the nine months ended March 31, according to the most recent financial statement it has released. Its full-year results are expected to be released at the end of this month.

UPMC, by comparison, reported net income of $726.8 million for the year ended June 30.

While Highmark and UPMC fight allegations that they worked together, the two health care giants are embroiled in their own battles. Highmark's decision to try to acquire West Penn Allegheny spurred UPMC to drop negotiations with the insurer over new reimbursement contracts. Without a contract, Highmark members will have to pay out-of-network charges at UPMC facilities after June 30, 2013.

Highmark and West Penn Allegheny were expected to reach a final agreement on the terms of Highmark's acquisition by the end of September, Highmark CEO Dr. Kenneth Melani said last month.

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