Highmark to spend $500 million on care network
Health insurance giant Highmark Inc. will spend up to $500 million to develop a new network of doctors, community hospitals and outpatient locations in Western Pennsylvania in addition to the $475 million it has promised to prop up West Penn Allegheny Health System, the Tribune-Review has learned.
The network will include medical malls, ambulatory care centers, a health information exchange, partnerships with community hospitals and primary and specialty care centers, officials with the insurer said.
Highmark President Dr. Ken Melani during the last two weeks has briefed Allegheny General Hospital physicians and others about his strategy to take on dominant rival UPMC.
"We believe this investment on behalf of our customers is crucial to address the unsustainable increases in health-care costs that are making health insurance less affordable for our customers and the community," said Highmark spokesman Michael Weinstein in response to questions from the Trib.
The Trib reported this month that Highmark wants to build 10 outpatient centers or medical malls in the Pittsburgh area. The first one would be in the Monroeville-Murrysville area. Highmark has announced a partnership with Premier Medical Associates, the area's biggest multi-speciality independent doctor's group.
Jan Jennings, a longtime health care consultant and former CEO of the independent Jefferson Regional Medical Center, said the $500 million will be money well spent because both Highmark and West Penn Allegheny are in a fight for their life.
"Where else could they better spend their money?" said Jennings, president of American Healthcare Solutions, Downtown. "They're putting this directly into the patient care delivery system, and you have some of the smartest people doing it. It's remarkable and marvelous."
The nearly $1 billion in total expenditures to reinvent itself as a health care provider represents about a fourth of the roughly $4 billion in reserves of nonprofit Highmark. The state's largest health insurer with about 3 million members, the Downtown-based firm had $462 million in profits last year.
Highmark announced in June plans to acquire West Penn Allegheny, the region's second-largest hospital network. West Penn Allegheny, whose hospitals include AGH in the North Side and West Penn Hospital in Bloomfield, reported a $51.8 million loss in operations during the fiscal year that ended June 30.
Highmark has given the hospital network $175 million. The money includes a $25 million advance in April, a $50 million payment in June and $100 million when they closed on the affiliation in November. This month, Highmark officials outlined about $20 million in improvements to Forbes Regional Hospital in Monroeville so it can compete with UPMC East, a $240 million hospital built less than a mile away and scheduled to open in July.
Highmark officials are awaiting approval from the Pennsylvania Attorney General, the state Insurance Commissioner, the Allegheny County Orphan's Court and the Internal Revenue Service in order to complete the transaction. Melani told AGH doctors he hopes to obtain those approvals by June 30.
Highmark's acquisition of West Penn Allegheny prompted UPMC to terminate its contracts with Highmark. But after threatening to end the contracts this year, UPMC extended its existing pact with Highmark through June 30, 2013.