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Highmark: Can't be sole lifeline

Luis Fábregas
| Tuesday, Sept. 26, 2006

Despite giving substantial loans to prop up hospitals in the past, Highmark Inc. said Monday it could not help Mercy Hospital because it cannot be the only source of assistance for troubled health care institutions.

"We feel that we cannot be the sole party or stakeholder in health care for helping these institutions," said Highmark spokesman Michael Weinstein. "We're willing to do our part but we feel it's a shared community responsibility."

Mercy, which lost $42 million in the last three years, announced last week it is merging with University of Pittsburgh Medical Center after approaching several other potential partners, including Highmark.

Mercy spokeswoman Linda K. Ross said Highmark responded to Mercy's request for help but the health insurer offered only minimal assistance with the cost of providing care to the poor and underserved.

"Given the scope of our needs, the amount they were able to make available wasn't enough," Ross said. "We were grateful for what they could provide."

Neither Mercy nor Highmark would say how much Highmark was willing to invest.

Highmark has been generous in the past. In 2000, it loaned West Penn Allegheny Health System $125 million to start the six-hospital network that rose after the collapse of the Allegheny Health Education and Research Foundation. Most recently, Highmark offered Children's Hospital of Pittsburgh $163 million to help build its pediatric hospital in Lawrenceville.

Weinstein said Highmark can only help so much because the health insurer -- which had a surplus of about $2.8 billion in 2005 -- is facing financial challenges of its own.

For instance, he said Highmark is spending hundreds of millions of dollars in technology improvements and upgrading systems so that it can pay claims faster.

He would not specify the cost of those upgrades nor other expenses made to implement the Medicare prescription drug program known as Part D.

"We have to be very prudent and judicious in our investments," Weinstein said.

It is too early to know if the UPMC-Mercy merger will have any impact on contract negotiations between Highmark and UPMC. Their contracts, which spell out reimbursement rates, are not due to expire for at least six years.

UPMC officials have said they suspect Mercy's contracts with Highmark pay Mercy more than what they pay UPMC hospitals. That means Highmark could stand to benefit from the merger because Mercy would likely be reimbursed less -- at the same rates as other UPMC hospitals.

Mercy's contracts with Highmark are not up for renewal for another three years, Weinstein said.

Highmark, which in the past raised concerns about UPMC's dominance of the market, believes the UPMC-Mercy does not stifle competition even though it leaves only two dominant hospital networks.

"This agreement preserves choice," Weinstein said. "It's leaving a faith-based system that might have been lost."

That's not the opinion of UPMC rival West Penn Allegheny Health System, which last week called UPMC's tactics monopolistic.

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