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Highmark-Penn State Health partnership signals increased competition with UPMC

Ben Schmitt
| Wednesday, Dec. 27, 2017, 10:45 a.m.
Penn State Health Milton S. Hershey Medical Center
Penn State Health Milton S. Hershey Medical Center

As the relationship between insurer Highmark and health giant UPMC enters its final year, competition between the two rivals is heating up in Central Pennsylvania.

Last week, officials from Highmark and Penn State Health, the parent company of Milton S. Hershey Medical Center, finalized a partnership they said should boost the insurer's goal of creating more medical facilites in targeted areas. Highmark is looking to expand in areas outside Pennsylvania's major cities.

The move comes barely months after UPMC merged with Harrisburg-based PinnacleHealth , a four-campus hospital system with patients in five counties, to form UPMC Pinnacle in central Pennsylvania.

Now, Highmark has a new footprint in the same region and the insurer will get three seats on Penn State Health's 15-person board as it looks to possibly develop new facilities and develop alliances with independent private-practice physicians.

Penn State Health CEO Craig Hillemeier said the goal is to keep patients closer to home for most forms of medical care.

“Both of our organizations are committed to the belief that they shouldn't have to travel two to three hours for care,” he said.

Highmark Health and Penn State Health plan to invest $1 billion in the partnership, although detailed financial terms were not released.

“It really is about preserving competition to allow for more value and innovation in the market,” said Deborah Rice-Johnson, president of Highmark Inc.

She said construction of hospitals is a possibility but not a certainty.

Highmark Health and its Pittsburgh-based Allegheny Health Network are building four neighborhood hospitals in Western Pennsylvania. Earlier this month, officials announced one of those hospitals will be built in Hempfield at the intersection of Agnew Road and Route 30.

Whether a similar strategy is employed in Central Pennsylvania remains to be seen.

“Together we feel we can build something very special,” said David Holmberg, president and CEO of Highmark Health.

The partnership comes a year after a failed attempt at a merger between Penn State Health and what was then known as PinnacleHealth System. Opposition from the Federal Trade Commission killed the deal and PinnacleHealth wound up joining UPMC.

In June 2019, nearly all business relations are scheduled to end between UPMC and Highmark under a state-brokered consent decree.

The consent degree preserves access to UPMC hospitals until then for seniors, cancer patients and other vulnerable populations with Highmark insurance, but after that Highmark members might not have in-network access to UPMC hospitals.

Ben Schmitt is a Tribune-Review staff writer. Reach him at 412-320-7991, or via Twitter at @Bencschmitt.

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