If the contract between Highmark and UPMC expires in six months, western Pennsylvania may become a case study for what some think is the future of American healthcare -- consolidated integrated delivery networks.
Following a dispute over in-network status for a new Highmark "Community Blue" plan and the insurer's acquisition of the seven-hospital Allegheny Health Network, the University of Pittsburgh Medical Center is insisting that it will not renew a contract with Highmark at the end of the year. Highmark wants the contract to continue.
The current agreement between Highmark and UPMC, the region's largest health system, keeps business flowing between them, but if the contract is not renewed or a new one is not brokered, that ends, creating integrated narrow networks.
In the meantime, these two healthcare giants have been trying to dominate draw in new insurance members -- or in the case of Highmark, the region's largest commercial insurer, retaining them.
Highmark now counts 5.2 million Pennsylvania, West Virginia and Delaware residents as members, about 3.2 million of them in the greater Pittsburgh metropolitan area and, as the nation's fourth-largest Blue Cross Blue Shield insurer, added 218,000 new members in the recently-closed open enrollment period.
The company also has a profitable employer group business. The health plan for Allegheny County's 43,000 public school employees and dependents recently decided to renew its contract with Highmark through June 2018, along with the county's 15,000 public employees and their dependents, through 2015.
UPMC Health Plan is now the second largest provider-owned insurer in the country and the second largest in the region, approaching 500,000 lives in its commercial plan, along with 125,000 Medicare Advantage members, 255,000 Medicaid members and 722,000 in a behavioral health plan.
Accounting for 10 percent of its health system parent's payer mix, UPMC Health Plan is increasingly pitching itself to small and large businesses and also enrolled almost 2,000 individuals through Pennsylvania's federally-run insurance exchange.
UPMC provides about 60 percent of all of Allegheny County's inpatient surgical care and 40 percent in the 29-county western Pennsylvania region, and it's still trying to grow regionally and abroad, opening a $8.5 million emergency department in January and launching several international ventures, including two cancer centers in Ireland, a treatment and research center in Kazakhstan, and second-opinion pathology consultations for providers in China and Singapore.
Highmark is UPMC's second largest payer after Medicare, accounting for about 19 percent of its revenue -- and is also now the largest competitor for medical and hospital care.
After acquiring and renaming the West Penn Allegheny Health System, Highmark has been trying to pitch the new Allegheny Health Network as a source of healthcare that's just as innovative as UPMC, recently signing an agreement with Johns Hopkins Medicine to offer clinical trials and specialist consultations for oncology.
As things stand now, Highmark's "Community Blue" plan excludes most UPMC facilities and physicians as preferred providers, which led UPMC to stop treating some long-time patients in the new plans, with only a few exceptions.
And under the current contract, UPMC is prohibited from "balancing billing" Highmark members at out-of-network rates, but that will expire along with the agreement at the end of the year. If the contract expires, it is possible some Highmark members may be willing to pay out-of-pocket to have access to UPMC's 20 hospitals and 3,500 physicians, or they may switch to UPMC's plan.
If the two cannot come to a resolution, they are approaching a day when consumers choose which integrated health system they will participate in, or be willing to pay extra to see certain providers outside their chosen network.
"In western Pennsylvania, it's the most important turning point, ever," said CFO Robert DeMichiei in a media release.