State tells UPMC to keep its network open to Highmark, other plans

Pennsylvania's attorney general picked a side in the long-running market battle between UPMC and Highmark Health, filing a court petition Thursday seeking to require UPMC to fairly negotiate with Highmark and other health plans.

Democratic Attorney General Josh Shapiro argued that UPMC has violated its charitable obligations to the state, and he wants the Commonwealth Court to enable open and affordable access to UPMC's provider network through negotiated contracts; require baseball-style arbitration if negotiations fail; and bar UPMC from engaging in excessive and unreasonable billing practices.

UPMC and Highmark signed a consent decree in 2014 governing their relations, and that expires June 30.

Citing the negative effects the market battle between UPMC and Highmark is having on Pennsylvania residents, Shapiro said the changes he's requesting are "necessary to prevent UPMC from inflicting further harm on the public by forsaking its charitable obligations in pursuit of commercial success."

The attorney general's intervention is the latest chapter in the bitter battle that began in 2011 when Highmark became UPMC's competitor in the Western Pennsylvania hospital market. The two powerful integrated systems have moved to establish exclusive plan-provider networks.

UPMC, which owns more than 30 hospitals and a health plan, objected to the attorney general's action. It said the five-year transition provided by the consent decree has allowed businesses and consumers adequate time to prepare for the end of the UPMC-Highmark relationship in Western Pennsylvania.

During that period, the region's insurance market "has transformed from one of the nation's most highly concentrated and least competitive to one of the most competitive and pro-consumer markets in the nation with some of the lowest-cost health plans available anywhere," said Paul Wood, UPMC's chief communications officer, in a written statement.

He added that "nearly all businesses now offer alternative, affordable plans so their employees can choose insurance products that allow them full, unfettered, in-network access to the UPMC hospitals and physicians they desire."

Highmark, which owns eight hospitals and a large health plan, lauded Shapiro's proposal to modify the consent decree.

"We have long held to the truths that vital community assets must be available for the public good and that nonprofit and charitable organizations exist for the benefit of the community," Highmark CEO David Holmberg said in a written statement. "We fully agree with the principle of preserving healthcare choice for all consumers."

Shapiro alleged that UPMC has withheld access to its physicians in Williamsport for patients whose employers have contracts with a competing health plan and refused to negotiate reasonable payment terms with self-insured employers. In addition, he alleged UPMC requires out-of-network patients to pay all estimated charges up front and in full before receiving treatment for non-emergency services.

At a news conference Thursday, Shapiro presented more than a dozen people who say they've experienced a disruption in their relationships with UPMC providers due to the health system's conduct.

One woman whose story he told, a first responder during the Sept. 11 terrorist attacks in New York City, will lose access to UPMC providers in Erie because of the system's refusal to contract with Highmark, and will have to travel hours to the Cleveland Clinic to receive specialized treatment, he said.

Highmark's Allegheny Health Network hospital chain has been expanding rapidly, in preparation for Highmark Blue Cross and Blue Shield's June 2019 breakup with UPMC, which started in 2012. Seven UPMC hospitals are set to exit the Highmark network, with only Children's Hospital of Pittsburgh remaining in the network through 2022.

To prepare, Holmberg said during a news conference Thursday that his organization has invested more than $1 billion, with a new facility scheduled to open every month for the next 16 months, including the $35 million Forbes Cancer Center in Monroeville.

Meanwhile, UPMC has plans to build three specialty hospitals in the Pittsburgh area, including heart and transplant, cancer, vision and rehabilitation service lines.

UPMC will end its in-network coverage of Highmark Medicare Advantage members in June, under a Pennsylvania Supreme Court ruling last year.

UPMC's Wood said Medicare Advantage members have an opportunity through March 31 to switch plans so they have in-network access to the providers they prefer.

Shapiro said that since UPMC saves almost $40 million in property taxes annually as a charitable, tax-exempt entity, it "must behave in a manner consistent with its charitable mission in all facets of its operation. ... Right now the taxpayers aren't receiving a fair deal."

Holmberg said Shapiro's proposal would still allow UPMC and Highmark to offer tiered health plans with preferred providers at lower cost, while allowing consumers to choose other providers at greater cost.

"The key is that all those products are available, putting the power in the hands of consumers rather than healthcare organizations," he said.