Highmark wants Pa. to relax oversight of AHN
Insurer says mandates are a disadvantage
Health insurer Highmark wants out from under some regulatory oversight in funding its Allegheny Health Network, telling the state Insurance Department that the 4-year-old notification and approval mandates are a competitive disadvantage in a market that is rapidly changing.
Among the conditions of Highmark’s 2013 purchase of AHN was the requirement to notify the Insurance Department of any fund transfer to the hospital system of $100 million within a 12month period, with department approval needed for contributions of $250 million.
The Allegheny Health Network is made up of seven hospitals, including Allegheny General Hospital and West Penn Hospital. Highmark acquired the health system, partly to counter growth by UPMC health system.
The Insurance Department is seeking public comment on the Highmark proposal starting Saturday and continuing through May 8 and comments can be emailed to ra-in-comment@pa.gov or mailed to Deputy Insurance Commissioner Joseph DiMemmo.
“This request significantly modifies the terms under which the Insurance Department approved Highmark’s affiliation with AHN, and because the financial health of both Highmark and AHN directly impact so many people in Western Pennsylvania, I want to hear from the public as I consider this request,” Insurance Commissioner Teresa Miller said in a prepared statement.
Highmark’s request to lessen regulatory oversight was part of a four-year, 20-page strategic forecast for AHN, which included the assumption the hospital network would end 2018 in the black for the first time in many years with
a $14 million balance.
In the forecast, Highmark also said it “intends to fund the ongoing capital expenditures at AHN to the extent that AHN cash flows are not sufficient to fund them.”
The notification and approval requirements for AHN funding have reduced the Pittsburgh health system’s flexibility and responsiveness in a rapidly changing market, creating an uneven playing field with competitors, Highmark spokesman Aaron Billger said.
“We’ve made significant financial progress and we’ve really moved to a transformational stage,” Mr. Billger said. “We believe the market dynamics have changed and the organization needs the flexibility to make timely and strategic investments.”
Fueled in part by an increase in patient volume from the end of the consent decree with UPMC in 2019, Highmark forecasted a 20 percent bump in total operating revenue through 2020, from $3 billion this year to $3.8 billion in 2020. Hospital discharges, which are roughly equivalent to admissions, were expected to rise 18 percent to 104,517 from 88,538 during the same period.
In its outlook, Highmark described a “growing divergence” in the road ahead for health care systems: doubled down reliance on the fee-forservice model of revenue generation, which has been used for years, or re-inventing health care to lower costs and improve quality.
Referring obliquely to its rival UPMC and that health system’s expansion plans, Highmark said it was committed to “full scale cultural change in the way that clinical services are sold and delivered.”
“Providers are increasingly looking to commit to one of the two models,” Highmark wrote. “The competitive dynamics have spread across the state and re-alignment is beginning to occur. In this context, Highmark needs to move even faster to secure the capabilities and positioning needed for its value-based delivery system to compete on equal footing and to respond to the moves being made by other players, not just in Western Pennsylvania, but across the state.”