Pennsylvania’s largest health system and largest health insurer are at a standstill in contract negotiations, and show no signs of calling it quits before their contract expires in 2012.
Pittsburgh-based Highmark and the University of Pittsburgh Medical Center (UMPC) are arguing as they attempt to renegotiate their 10-year contract, which sets the rates Highmark pays for services from UPMC doctors and hospitals. Their current contract is set to expire June 30, 2012.
Highmark has considered acquiring West Penn Allegheny Health System since April, which would allow the insurer to transition from an insurance company to a provider, according to the Pittsburgh Post-Gazette. The move is not unsimilar to those of other health insurers, seeking to expand their services in the wake of the potentially crippling effects of federal health reform.
UPMC will not continue to negotiate with Highmark because the insurer will be a direct competitor if it buys the West Penn Allegheny Health System, Paul Wood, vice president of public relations for UPMC, said in a statement.
The health care system announced June 14 its intention to cancel the contract for most of its doctors with Highmark after the contract expires at the end of June.
“By refusing to negotiate with Highmark, UPMC is threatening to limit access for millions of people to a number of important UPMC facilities that are viewed as critical community institutions,” said an open letter posted June 12 on Highmark’s website.
Members costs could rise
When Highmark’s contract with UPMC expires, the insurer’s members will have to pay out-of-network provider rates to most UPMC physicians, according to the Pittsburgh Post-Gazette.
But Highmark said its commercial policyholders will have access to most UPMC facilities until mid-2013, because of a one-year run-out period attached to the current contract, according to Highmark’s open letter.
UPMC responded in a notice to its employees and doctors that Highmark contracts with the health care system’s doctors, as opposed to those with the hospitals, can be terminated with 60 days notice, which UPMC intends to do June 30, 2012, the Pittsburgh Post-Gazette reported. That deadline would give patients until the end of August 2012 before they would have to pay out-of-network rates.
Seeking 40% more from insurer
Highmark responded that it intends to continue to cover patient visits to UPMC doctors and hospitals with no special approvals or permissions through the middle of 2013 while reimbursing UPMC doctors as in-network providers, the Pittsburgh Post-Gazette reported.
UPMC also asked for a 40% hike in payments plus an annual inflation increase from Highmark, which the insurer said is “unreasonable and unaffordable, in its open letter. A 40% rate hike would lead to a $400 million increase in health care expenses and significant increases in local insurance premiums, according to Highmark.
UPMC responded that it requested market rates as “determined by independent third parties in keeping with reimbursements in markets of similar size and demographics,” but “negotiations ended before appropriate data was exchanged and rates were ever seriously discussed,” according to the Pittsburgh Tribune-Review.
Highmark serves 4.8 million members in Pennsylvania and West Virginia through the company’s health care benefits business.
UPMC is a has more than 50,000 employees in Pittsburgh, Pa. It integrates more than 20 hospitals, 400 doctors’ offices and outpatient sites, a health insurance services division, and international and commercial services.