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Arbitrators side with UPMC; Highmark must pay $188 million for cancer care

| Tuesday, Nov. 10, 2015, 3:55 p.m.

An arbitration panel sided with UPMC over rival Highmark Inc. in a $188 million contract dispute related to cancer care payments, according to documents UPMC filed Tuesday with a municipal regulator.

The insurer improperly reduced oncology payments to the hospital system for patients with Highmark's commercial plans from April 2014 through Oct. 2015, the three-person state panel determined Friday. UPMC included the panel's decision in a financial update the hospital system filed with the Municipal Securities Rulemaking Board.

While the panel's decision was limited to cancer payments to UPMC Shadyside Hospital, UPMC said in a summary of the arbitration that Highmark has agreed to pay a total of about $188 million to resolve claims across the hospital system.

In a prepared statement, Highmark suggested employers and self-insured customers who buy insurance in the commercial market might owe the difference between what Highmark paid and what UPMC charged for cancer care.

“These were not funds that Highmark paid, but rather that employers and self-insured customers paid,” Highmark spokesman Aaron Billger said of the cancer payments. “In the event that UPMC has had a material financial change, those funds would be coming from the employers and residents of Western Pennsylvania.”

UPMC said it could not comment on the arbitration under an agreement with Highmark.

The cancer payments are part of a broader contract dispute between the nonprofits that escalated to the point that the state stepped in and brokered a consent decree in 2012 partially governing how the nonprofits deliver and pay for health care. The decree said an independent panel would settle outstanding disagreements, including the cancer payments.

The nonprofits entered commercial contract negotiations in 2010. At that time, UPMC was dissatisfied that Highmark was paying less than other insurers for hospital services, according to the panel. UPMC then converted many of its clinics, which had been physician-based, to hospital-based clinics, which increased reimbursement rates by about $100 million per year, according to the panel. Highmark paid the higher rates at first, but decreased payments later.

Highmark in September 2014 sued UPMC to recover $300 million in payments the insurer said UPMC had overbilled since 2010. The remainder is not addressed in Tuesday's filings.

Billger in the statement said that Highmark “took a stand to end UPMC's irrational oncology drug pricing” when it lowered the payments.

The panel did not consider whether UPMC was within its rights to make the structural change, it states in its decision. The panel found that Highmark deviated from a payment schedule both sides agreed to in 2012 that raised rates each year.

“To now argue, as Highmark does, that it had the right to unilaterally invalidate the agreed upon ‘commercial hospital rate' increases is completely lacking in credibility or evidentiary foundation,” the panel wrote.

The panel's decision is limited to about $24 million in oncology fees that Highmark specifically owes UPMC Shadyside. A separate financial document filed by UPMC says the two nonprofits have agreed to apply the ruling to the full amount of cancer care payments, which UPMC estimates to be in excess of $188 million.

UPMC and Highmark are awaiting a Pennsylvania Supreme Court ruling on a separate dispute over Medicare Advantage networks. Highmark argues UPMC must provide treatment at in-network rates to the insurer's 182,000 Medicare Advantage members. UPMC argues the consent decree doesn't require it to offer in-network rates to those members.

Wes Venteicher is a staff writer for Trib Total Media.

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