Conscious Uncoupling

Dear Reader: There has been a lot written about the recent litigation involving the Attorney General, Highmark, and UPMC.  What follows is the perspective of Pittsburgh- based healthcare consulting firm Tonic Advisors.  We invite you to comment in the section below the article. We will continue to provide thought provoking perspectives on this issue to keep our membership as well informed and attuned to thoughtful analyses of current events.  The opinions of Tonic do not necessarily reflect the opinions of the leadership of PBGH or its members.  We hope you find this analysis interesting and useful as you evaluate the ongoing litigation and how it may affect your organization.

By Tonic Advisors

On June 14th, the Pennsylvania Commonwealth Court’s Judge Robert Simpson ruled that the Attorney General (AG) Josh Shapiro did not have the authority, under the terms of the Consent Decree between the State, Highmark and UPMC, to extend the duration of in-network access for Highmark members.  The ruling stated that “modifications” under the contract allowed for modest changes, but not changes to the term or duration of the agreement.  The AG had sought an indefinite extension of the agreement.

This decision will likely be appealed.  It seems likely, however, that come July 1st, most Highmark members will lose access to most UPMC facilities.  This particular cause of action is only one of four in a pending lawsuit filed by the AG against UPMC. The other counts go to the heart of state supervision over not-for-profit corporations.  These other three counts, if successful, have profound ramifications for the future of UPMC and its governance as well as the governance of many if not all not-for-profit corporations statewide.  For now, UPMC has won an important victory.  The next series of battles will have implications well beyond the Consent Decree.

Where does this Ruling Leave Patients in Western Pennsylvania?
(This is all tentative, new contracts have not been signed).

  1. Medicare Advantage patients. These are Medicare eligible patients who opted to purchase a private Medicare plan through an insurer.  Though this ruling does not directly affect these patients, in the run up to the ruling, UPMC reversed its policy on the group of patients who purchased private Medicare from Highmark.  Initially UPMC had said the UPMC facilities would be off limits or that these patients would have to pre-pay out of pocket to use UPMC services.  UPMC agreed instead to allow Highmark to pre-pay for these patients based on what Medicare would have paid them for the same services.
  2. UPMC has said that no Highmark members will be at increased financial exposure from Emergency Room services. UPMC will accept payment commensurate with what the UPMC Health Plan pays to Allegheny Health Network for out-of-network emergency care.
  3. UPMC has stated that its specialty hospitals (Children’s and Western Psych) will continue to be open to all carriers including Highmark.
  4. UPMC is proposing that Hillman Cancer Center will continue to be in-network for Highmark members at previously negotiated rates.

It is critical to note that as of now, not all of these terms are contractually bound nor compelled as a matter of law.  In addition, in the press releases, UPMC has suggested that it could change its mind if needed.

Is Anyone Winning in All of This?

The fight is not over.  The AG still has three significant actions pending against UPMC that go directly to its core status as a not-for-profit.  There is some public backing to curtail the actions of large not-for-profits that behave more like for-profit companies.  Any action taken here, whether through judicial means or legislation must be clearly thought through.  The unintended consequences of poorly modeled action are likely to overwhelm the stated purposes very quickly.

A few things are certain.

  1. The AG lost the first round. The consent decree will expire. Once it does, it’s probably too late to try and bring it back—ever.  The AG still has another bite at the apple to compel UPMC to change policies through his other counts, but these are still in the courts.
  2. Highmark lost. It’s not clear what Highmark had to gain in this.  Highmark was selling a mixed message.  On the one hand, Highmark says “we don’t need UPMC, we can provide first rate care without them” and on the other they say “please don’t let UPMC leave us!” As it is, they now have to live with the fallout as they no longer will have access to UPMC for many of their subscribers.
  3. This is a double victory for UPMC. In addition to winning in court, UPMC has also scored strategic victories against its arch rival Highmark in market positioning.

Ignore the Courtroom Performance.  What is the Real Issue?

There is an important nuance to the entire game that UPMC is playing.  UPMC does not want to lose ANY of the patients that Highmark manages, they would just rather have those patients get their health care coverage (i.e., insurance) from someone else, preferably UPMC itself.  The reason that they win here is that they can continue to point out to the market that in order to get UPMC, you need to have someone other than Highmark. Then, UPMC selectively lets Highmark members have access to select UPMC facilities such as Hillman Cancer Center when it wants to make sure that it has enough patient volume at its facilities.  This combination of creating uncertainty and then relenting creates a cycle that continues to get buyers in the market to leave Highmark insurance—which is UPMC’s ultimate goal.  They manage to do this without really losing significant revenue at their hospitals.  Highmark, by continuing to stress the need for UPMC to be in-network plays into their message.


UPMC is playing Three-Dimensional Chess, and Highmark and the AG are playing checkers.  As discussed, the rest of the AG’s lawsuit focusing on non-profit behavior and state control remain.  On balance, the rest of the suit seems like a broad overreach but there may be some concessions that the AG is able to achieve.

Our view is that there are other ways than the AG’s litigation to turn the tide, level the playing field and generally make the market more competitive, more rational, and more focused on doing what is right for the patient rather than Big Corporate Healthcare.  We will save that for another article.

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