State takes UPMC to court
Attorney general says hospital system strayed from its charitable mission
The Pennsylvania Attorney General’s office went to court Thursday to pressure UPMC to change its approach to rival insurer Highmark’s members, accusing the Pittsburgh-based hospital giant of violating the state’s public charities law by restricting access to its doctors and medical facilities.
The Commonwealth Court petition filed by Attorney General Josh Shapiro seeks to amend a 5-year-old consent decree brokered by the state that allows some people with Highmark health insurance to continue seeing UPMC doctors until July 1.
A news conference Mr. Shapiro held Thursday in Pittsburgh highlighted the stories of patients caught up in the battle between the two health companies and the attorney general’s exasperation with UPMC’s unwillingness to accept new terms.
“This is the only option left,” he said. The showdown has simmered for some time. For years, UPMC accepted Highmark health insurance, and Highmark covered the bills of patients, who could have seen any doctor in the UPMC network.
Relations soured in 2011, when Highmark decided to buy the former West Penn Allegheny Health System and create a direct competitor to UPMC, which also offers health insurance and medical care.
The two have battled since then
“All this can be summed up in one word: Fairness.” — Josh Shapiro
— sometimes in court.
This time around, Mr. Shapiro said, he is seeking “open and affordable access” to UPMC services; UPMC’s acceptance of binding arbitration if an impasse is reached in contract negotiations with an insurer; and protection against “excessive and unreasonable billing practices” that result in “unjust enrichment.”
“All this can be summed up in one word,” Mr. Shapiro said. “Fairness.”
In its court filing, the attorney general’s office wrote that it has been working for two years to attempt to get Highmark and UPMC to modify the consent decrees, holding “numerous meetings with both organizations.” Late last year, the AG’s office gave Highmark and UPMC a formal proposal for modifying the agreement.
Mr. Shapiro said Highmark had accepted the changes, but UPMC did not.
“UPMC can still change its mind,” he said.
Not surprisingly, Highmark president and CEO David Holmberg supported the attorney general’s action, envisioning a Western Pennsylvania health care network open to all insurers, with hospitals tiered by employers according to price and performance.
“All those products would be available, truly making the market competitive,” he said.
The view was different from the U.S. Steel Tower, where UPMC is headquartered.
UPMC spokesman Paul Wood said the five-year wind down of the consent decrees “has allowed businesses and consumers substantial time to prepare” for the breakup.
During that time, Western Pennsylvania’s health insurance market has become among the “most competitive and proconsumer markets in the nation with some of the lowest cost health plans available anywhere,” he said.
“Consumers have greatly benefited from the heightened competition,” he said in a statement.
Mr. Shapiro was confident a new consent decree could be hammered out before it expires June 30.
Many Highmark members have expressed anxiety over having to switch doctors, including about 175,000 seniors in Allegheny and Erie counties who have coverage through Highmark Medicare Advantage plans. After June 30, UPMC has said, it will require them to pay upfront for care.
In addition, Highmark member access to UPMC Children’s Hospital of Pittsburgh in Lawrenceville is scheduled to run out in 2022, a facility that Highmark donated $233 million to in 2002.
At the news conference, Mr. Shapiro said UPMC had violated state law by shutting out competing insurers, including Highmark, from its network.
“Modifications are necessary to keep UPMC from inflicting harm on the public,” Mr. Shapiro said.
Specifically, Mr. Shapiro’s office contends UPMC is violating “its stated charitable purposes,” the Solicitation of Funds for Charitable Purposes Act, the Nonprofit Corporation Law of 1988, and the Unfair Trade Practices and Consumer Protection Law.
Nonprofit institutions such as UPMC receive tax breaks in return for providing services that a government entity would otherwise have to offer, but UPMC has not played fairly, Mr. Shapiro said.
State legislators from Allegheny County, all Democrats, have been quick to float legislation aimed at preventing such messy divorces in the future.
Senate Minority Leader Jay Costa, of Forest Hills, is seeking co-sponsors for a bill that “would require UPMC and Highmark to either contract with each other for services or enter mandatory arbitration.” Rep. Dan Frankel, of Squirrel Hill, said he is working with Republicans in the House on a similar effort.
House Minority Leader Frank Dermody, of Oakmont, is seeking co-sponsors for an effort to require “taxexempt hospital systems to accept reasonable reimbursement payments from uninsured patients and patients covered by other health insurance plans.” Such a measure would change the state’s constitution, meaning an identical bill would have to pass in two consecutive legislative sessions and then voters would have to approve it through a referendum.
Mr. Shapiro argued that some of UPMC’s advances are being funded by taxpayers who are then denied access to UPMC’s facilities and doctors.
Or, as the court filing laid out, “They pay once through the tax benefits and charitable donations they provide to UPMC and they pay a second time through higher prices for inefficiently used, duplicative facilities owned by UPMC and other providers. Some who pay twice are then denied care at the very UPMC facilities they helped build.”
The filing rattles off a series of donations to UPMC or its related entities, including more than $77 million from the Hillman Company and the Hillman Family Foundations since at least 1952. The Hillmans “never intended that their donations would be used to only treat patients with certain types of insurance,” the AG’s office wrote.
The attorney general’s action creates a distraction for UPMC president and CEO Jeffrey Romoff, who turns 74 this year, at a time when the health care system can little afford it.
UPMC is four months into a $2 billion upgrade of three Pittsburgh hospitals and has been expanding rapidly into eastern Pennsylvania in recent years by snapping up hospitals.
Suddenly, though, it seems UPMC has a target on its back, despite its generous support of the Pittsburgh Promise college scholarship program for city students, groundbreaking scientific research and other community benefits.
The seeds for UPMC’s newest legal headache may have been sown after the 2014 consent decree. The system quietly revised its staterequired Patients Rights policy. The policy prohibits, among other things, discrimination based on a “patient’s source of payment.”
Some business leaders have interpreted that clause to mean insurance coverage, but UPMC eliminated that clause, according to the attorney general.
That opened up the health care giant to a new problem — disciplinary actions for going against state law, the attorney general wrote in the court filing.
“[Taxpayers] pay once through the tax benefits and charitable donations they provide to UPMC and they pay a second time through higher prices for inefficiently used, duplicative facilities owned by UPMC and other providers. Some who pay twice are then denied care at the very UPMC facilities they helped build.” — Josh Shapiro, Pennsylvania attorney general