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Highmark, UPMC revise arguments since health care coverage contract expired in 2014

| Thursday, Jan. 8, 2015, 11:18 p.m.

Few things in the world of health care have been as consistent as the positions of Highmark Inc. and UPMC in their contract battle.

But all things change.

UPMC wants all Highmark members to keep their UPMC physicians if that's their choice, flipping three years of pushing for a contract termination that would exclude the insurer's non-Medicare members from UPMC's system of hospitals and doctors.

Highmark now says only its members in treatment for ongoing medical conditions can stay with their UPMC doctors, even though it had argued for unfettered in-network access for its members since 2011.

What's different now that the contract expired Dec. 31, experts say, is that UPMC may not have been as successful in persuading insurance subscribers to drop Highmark, which is the biggest source of UPMC's patient revenue after the government's Medicare and Medicaid programs.

UPMC generated $1.9 billion, or 31 percent of its net patient revenue, from treating Highmark members in its most recent fiscal year, financial statements show. Moving insurance clients away from Highmark was key to blunting the potential revenue loss.

“I think from UPMC's standpoint it's pretty natural: They want to keep patients,” said James McTiernan, a health consultant with Downtown benefits firm Triad Gallagher.

UPMC has experienced a 4.5 percent decline in hospital discharges in Allegheny County between 2012 and 2014, a loss of revenue that can pressure its finances. But overall net patient revenue over the same period increased by 12.7 percent. The company posted an 83 percent decline in net income in the July-September period, its most recent quarter. Operating profit in that period rose by 69 percent as the health system cut expenses and used technology to improve productivity.

Highmark, meanwhile, is facing the reality that it must boost patient volumes at its own hospital system, Allegheny Health Network. It had forecast it needed to move about 40,000 patients a year from UPMC and the region's community hospitals to make a financial turnaround at its hospitals work.

“They certainly have sent mixed messages about what's best for their enrollees,” said Joseph Angelelli, a health services researcher and assistant professor at Robert Morris University. “They have hospital beds to fill, too.”

Put another way, it all comes down to money to the nonprofit health care organizations.

The changed positions were highlighted this week in a letter sent by state Health Secretary Michael Wolf to the CEOs of UPMC and Highmark in which he discussed a disagreement over a provision of a state-negotiated consent agreement they signed in June. At issue is a “continuity of care” provision that's supposed to allow Highmark health insurance subscribers to keep seeing their UPMC doctors for ongoing care of a medical condition.

UPMC is arguing for a loose interpretation of that clause that would allow broad access for Highmark members to its doctors and hospitals. Highmark seems fine with a more restrictive interpretation.

Wolf gave the companies until Friday to work out a resolution before he would send them to mediation, the first step in settling disputes under the consent agreement.

“In order to prevent a large number of people being told they had continuity of care only to find out before or after the fact that Highmark disputed it, the agencies believe that it is to everyone's benefit to require the companies to work this out between them before causing any more confusion in Western Pennsylvania,” Department of Health spokeswoman Aimee Tysarczyk said.

The key to UPMC's strategy in cutting off Highmark's access was persuading insurance customers to switch to UPMC Health Plan or one of three national insurers that have full in-network access.

Several large employers, including Erie Insurance and Port Authority of Allegheny County, announced they were switching from Highmark to preserve full access to UPMC. Some others, instead of dropping Highmark, offered the insurer's plans as a choice along with another carrier.

Highmark also fought back with deep discounts for companies that stuck with it, including the United Steelworkers union, Allegheny County and several consortia of public school employees.

Highmark does not provide quarterly results and it hasn't released its annual financial information for 2014. Spokesman Aaron Billger declined to release membership numbers as of Jan. 1, but said the company had “strong” customer retention rates in the mid-80 percent range, “which isn't too far off from prior years.”

At the end of 2013, Highmark said it had 3.2 million members in Western Pennsylvania, a number that includes individual subscribers, employer group plan members, Medicare Advantage customers and national account members. The total was unchanged from 2012. Highmark does not break out its number of commercial members in Western Pennsylvania.

UPMC spokesman Paul Wood declined to provide Jan. 1 enrollment numbers for the health plan. But as of July 1, the health plan had more than 500,000 commercial members, up 20 percent from July 1, 2012.

Cigna Corp., Aetna Inc. and United Healthcare declined to provide enrollment numbers as of Jan. 1. The three national insurers have been trying to increase market share in Western Pennsylvania by offering an alternative to Highmark with full access to UPMC. At the height of its battle with Highmark, UPMC had suggested that employers should switch to one of these carriers to keep UPMC access.

“I would think that UPMC's behavior would suggest that Highmark was at least fairly successful in retaining their enrollment,” Angelelli said.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or

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