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Saturday, May 28, 2011

Code Blue! Who wins in healthcare fracas?

Posted By on Sat, May 28, 2011 at 4:58 AM

They may get lost in the holiday weekend, but both our dailes have stories about the ongoing clash of healthcare titans, and they are well worth reading.

UPMC, the region's biggest healthcare  provider, and Highmark, our biggest health insurer, have been on the outs for months -- with a marked escalation in tensions since Highmark announced a willingness to partner up with the ailing West Penn Allegheny Health System (WPAHS). On the surface, today's story concerns a technical dispute over when a contract between the two entities expires: Will Highmark's network cease covering UPMC facilities in 2012, or 2013? But this somewhat arcane battle gives you an interesting look at the broader war.

Highmark insists that its contract with UPMC doesn't end for another two years, and accuses UPMC of having "mounted a communication campaign aimed at frightening Highmark policyholders." UPMC, for its part, says their contract ends next June, and faults Highmark for "having announced its intention to compete with UPMC as a provider" of healthcare. 

"UPMC has a responsibility to ensure that the highest quality care is widely accessible and affordable for the largest number of people," the hospital chain contends. And the way to ensure access for the largest number of people, apparently, is to walk away from an agreement with the outfit most likely to be insuring them. 

But put aside such concerns -- and whatever amusement you derive from hearing UPMC laud the virtues of competition in the healthcare market. A couple things jump out at you about this fracas.

First, these are the two healthcare entities that the WPAHS, the parent of Allegheny General Hospital, accuses of being a collusive monopoly

Second, doesn't Highmark's position here look pretty weak? The guy with the strongest negotiating position, it seems to me, is the one who is most willing to get up from the table. And that sounds like UPMC, which is making lots of noise about welcoming new insurers to the market. Not to mention the fact that UPMC has an insurance operation of its own. (Which, by the way, makes it a little hard to be sympathetic to complaints about Highmark's willingness to compete: UPMC has been encroaching on Highmark's turf for years.) 

Conversely, when Highmark says UPMC is scaring customers, it seems like an acknowledgement that UPMC has lots of leverage ... and Highmark doesn't want the hospital chain to use it. 

In any case, at the moment, it seems easier to bring new insurance companies into the market than it is to import a rival hospital chain. UPMC has recently struck deals with national insuers CIGNA, Aetna, and UnitedHealthcare.

By contrast, while Highmark is enjoying big revenues today, who does it have to work with down the road? There are independent healthcare providers in the region: St. Clair Hospital leaps to mind. And I'm sure if Highmark did move ahead on plans to partner with WPAHS, the two entities could settle the WPAHS lawsuit. The larger concern may be that -- as is also being reported this weekend -- WPAHS has seen a nearly 20 percent decline in admissions over the past year.

On some level, it's hard to imagine Highmark and UPMC not working something out. Not so long ago, after all, Highmark invested more than $200 million so UPMC could have a nice, shiny new Children's Hospital. But whatever this battle means for UPMC and Highmark, though, the real question is what impact it will have on consumers. Medicare consumers will be unaffected by this squabble, which is nice. But like some others, I suppose, I can't help but be reminded of an old proverb: When elephants fight, it's the grass that gets trampled.

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