In the race to managed care, Pittsburgh has lagged behind the field. But not for long.
In recent weeks, the buzz of healthcare consolidation in the manufacturing town has heightened to a roar. Dueling healthcare networks, each created to compete for managed-care contracts, have emerged as major contenders, and reports indicate a third network may be in the works.
Tri-State Health System, a seven-member network, is led by University of Pittsburgh Medical Center, the region's largest academic medical center. Attempting to create a vertically integrated healthcare system, UPMC is gobbling up physicians and hospitals. Its recent merger with fellow Tri-State member St. Margaret Memorial Hospital in Pittsburgh is an example (March 4, p. 4).
"Our general strategy is to develop these hospital relationships through Tri-State and separate affiliations," said Jeffrey Romoff, UPMC's president. Over the next few years, the medical center will invest some $200 million in hospitals, physicians and satellite facilities, he said.
Recently, UPMC also announced agreements to acquire South Side Hospital of Pittsburgh and Aliquippa (Pa.) Hospital, and it's reportedly discussing a merger with Pittsburgh's Shadyside Hospital. Shadyside continues to weigh other options as well, including a possible deal with Columbia/HCA Healthcare Corp. (Dec. 18-25, 1995, p. 4).
"The general objective is to assure....that there will be few places in this region that you cannot access a UPMC facility," Romoff said.
Pursuing a different strategy is Tri-State's competitor, Southwest Integrated Delivery Network. SIDN seeks to build an integrated network through collaboration, not asset mergers. Anchored by Pittsburgh's Allegheny General Hospital, the network's five acute-care members and affiliated physicians are focused on gaining covered lives at the lowest possible cost.
The for-profit network is owned and governed by its five physician organizations and five hospitals, each of which invested $50,000. For capitalization purposes, each hospital also purchased $3.3 million of nonvoting preferred stock.
James S. Fritz, who was appointed SIDN president and chief executive officer last September, previously headed an Orlando, Fla.-based integrated delivery system now called One Source and is a former senior vice president of Columbia's central Florida division.
"Part of what's driving this (network development) is the final push into managed care in this community," said Ned Troup, a partner with Andersen Consulting in Pittsburgh.
Although Blue Cross of Western Pennsylvania controls 65% of the market, managed-care players like U.S. Healthcare and HealthAmerica have begun to make inroads.
To preserve a prominent role, Blue Cross is rolling out its own strategy for linking with hospitals and physicians. The plan's management service organization is seeking long-term agreements with primary-care physicians.
In one agreement it has completed, the plan's MSO will provide management services to Shadyside Hospital's 35 primary-care physicians. The goal is to align with some 500 physicians through provider contracts or practice acquisitions.
Blue Cross of Western Pennsylvania also is expanding into healthcare delivery by developing seven primary-care sites throughout Allegheny County.
Meanwhile, Pittsburgh's Blue Cross plan and Camp Hill, Pa.-based Pennsylvania Blue Shield voted late last year to pursue a merger. The deal requires approval by the state health and insurance departments.
Pittsburgh's Roman Catholic institutions, most notably Mercy Hospital of Pittsburgh and St. Francis Medical Center, remain unaffiliated, although observers wouldn't be surprised to see a Catholic-led network emerge.
At least one inter-network alliance is being discussed. Pittsburgh's South Hills Health System, which is a member of Tri-State, and St. Clair Hospital, an SIDN member, are in talks. "We don't see this in any way as contradictory to our (network) memberships," a South Hills spokeswoman said. She said there's been no discussion about the two hospitals leaving their respective networks.
At this point, analysts and consultants hesitate to predict the success of either Tri-State or SIDN in attracting managed-care contracts. "Neither one has emerged as the stronger network," Troup said.