PITTSBURGH - Highmark, Western Pennsylvania's largest health insurer, took another step toward building a comprehensive provider network in the region with the announcement in June of a $275 million commitment to Jefferson Regional Medical Center.
Under the terms of the proposed strategic affiliation, Highmark has agreed to commit $75 million to the Jefferson Regional Medical Center Foundation to support improved community health and wellness care; an investment in a new emergency department at Jefferson's Bethel Park campus; and expanded clinical services including neurosurgery and gynecology. Highmark will also gain control of 75 percent of Jefferson's board of directors.
The announcement is the latest strategic maneuver by Highmark designed to build a geographically diverse healthcare network as it looks to minimize the impact of the anticipated expiration of its contract with the region's dominant provider network, the University of Pittsburgh Medical Center (UPMC) at the end of 2014.
But Highmark officials are clear that its deal with Jefferson is a much different animal than its plans to take over the operations of struggling West Penn Allegheny Medical System for $475 million.
"This is not a rescue. This is instead part of a growth strategy we both have," said J. Robert Baum, Highmark chairman and CEO, in a press conference announcing the agreement.
Last year, UPMC announced plans to acquire the troubled West Penn Allegheny, which has facilities primarily in the north and northwest areas of the Pittsburgh metropolitan area. That deal is still awaiting approval from state insurance regulators and the Pennsylvania Attorney General's office - approvals that the newest deal with Jefferson Regional - whose facilities are located in the southern metro area - will also need to secure.
"This decision to align with Highmark is a recognition that we share a common vision to meet the healthcare needs of the southern region of western Pennsylvania," said John Dempster, CEO of Jefferson Regional Medical Center.
With its newest commitment to Jefferson Regional, Highmark is showing that it will not hesitate to tap the nearly $1 billion the company has reserved with the express purpose of building a broad-based integrated healthcare network in the region. The company is currently developing as many as 10 walk-in clinics that are aimed at helping the insurer provide a comprehensive healthcare network.
But even with the two hospital systems and new clinics, the network would be a far cry from the penetration enjoyed by UPMC, which has more than 20 hospitals and 400 clinics throughout western Pennsylvania.
"We need to step it up in western Pennsylvania," John Paul, Highmark's president, provider organization, and the man responsible for expanding the insurer's clinical footprint, told the Pittsburgh Tribune, shortly after it announced its new affiliation with Jefferson.