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Highmark, UPMC rivalry helps keep patient care costs manageable, CEOs agree

| Saturday, May 16, 2015, 10:56 p.m.

UPMC CEO Jeffrey Romoff thinks this fight is good for you.

His hospital system's bare-knuckled separation from insurer Highmark Inc. might be ugly and noisy, but the competition should clamp rising health care prices and keep the dominant companies from colluding to fatten themselves, Romoff says.

Highmark Health CEO David Holmberg agrees there's a chance to curb costs, though he believes the rivalry and disagreements could be much less bitter.

“This can be solved on the back of a napkin if rational people work together,” Holmberg said. “You make up your own mind.”

The men dealt jabs but revealed some common ground in rare, separate discussions with reporters last week, each executive appearing resigned to a future with no commercial contract between them.

Both said they expect the Downtown-based nonprofits to stay in business, but Romoff, a longtime architect of hospital consolidation, declined to speculate about whether one might wipe out the other.

He said UPMC behaves “as if we want to win.”

“If asked the question purely, ‘Do you want to be the last man standing?' I've got to say no. It's not a nice place to be,” Romoff said.

He suggested the scenario could result in regulators treating UPMC like a utility. If that happens, UPMC's freedom to innovate would crumble, he said.

A dozen news organizations from across the country, including Trib Total Media, had about 90 minutes to question each executive as part of a fellowship program under the Menlo Park, Calif.-based Kaiser Family Foundation.

Romoff went first, hosting the group Wednesday afternoon in a 62nd-floor board room in the company's iconic U.S. Steel Tower headquarters. Holmberg spoke the next morning in a conference room at the Highmark-owned Wexford Health and Wellness Pavilion, a $100 million outpatient center that opened in October.

The facilities represent health care behemoths locked in a tightening battle for patients across Western Pennsylvania, where UPMC runs the biggest hospital system with about $12 billion in annual revenues and Highmark is the largest health insurer with about $17 billion.

A longtime commercial contract that allowed Highmark customers in-network access to UPMC facilities expired in December, after Highmark formed the North Side-based Allegheny Health Network to challenge UPMC. The eight-hospital network includes West Penn Allegheny Health System, whose long-troubled finances opened a window for a near-monopoly by UPMC in Pittsburgh.

“I think what you're going to see is ultimately, a competitive market on the provider side and a competitive market on the insurance side. The question is: How do we do that without people getting hurt? How do we focus on the customer and the patient and not on each other?” Holmberg asked.

He called Allegheny Health part of an effort to streamline care and preserve patient choice and access. Romoff cast the system as an attempt to mirror UPMC's integrated approach.

UPMC owns more than 20 hospitals and the second-largest health insurer in the region, UPMC Health Plan.

“If you deliver the highest quality care, you win,” Romoff said, echoing UPMC advertising campaigns that tout its national rankings. “People are willing to not like me and love their doctor” at UPMC at the same time.

A state-brokered consent decree was intended to ease the post-contract transition this year by allowing extended in-network UPMC access for some Highmark customers, among other provisions. Repeated disputes over the arrangement landed in Commonwealth Court last month, when Gov. Tom Wolf and Attorney General Kathleen Kane urged the court to order arbitration. UPMC contests the administration's intervention, while Highmark said it welcomes the action. A hearing is scheduled for May 27.

“We don't want to see either of these health systems weakened so they can't provide care to community members who want them to be healthy and strong. We want them to be part of the infrastructure here,” said Martin Gaynor, an economics and health policy professor at Carnegie Mellon University's Heinz College.

He said there's “a reasonable chance” that UPMC could emerge as a near-monopoly if Allegheny Health falters.

It doesn't appear that one company is beating the other, said Stephen Foreman, an associate professor of health care administration and economics at Robert Morris University. And he's not convinced the competition is forcing prices lower.

“If they were truly competing for patients, they would both accept all patients (as in-network),” Foreman said. “It's not competition in that sense.”

Adam Smeltz is a staff writer for Trib Total Media. He can be reached at 412-380-5676 or asmeltz@tribweb.com.

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