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Highmark-Penn State Health Embark on Strategic Partnership

News  |  By Jack O'Brien  
   December 18, 2017

Pennsylvania might hold the future blueprint for providing communities with affordable access to healthcare.

A pair of the most prominent names in Pennsylvania healthcare announced a $1 billion initiative to provide residents with affordable access to community-based care. 

Penn State Health and Highmark Health signed an agreement Monday for a strategic partnership in central Pennsylvania that aims to develop a broad-based community health network. The arrangement will rely on an unconventional approach to finance and service.

Despite the partnership, Penn State Health and Highmark will remain independent companies and continue to do business with other insurance providers and hospitals to address their respective needs. There are no plans to move towards exclusivity between the two companies. Executives from both companies say the separation will ensure competition to lower prices for consumers.

The partnership will be anchored by the Milton S. Hershey Medical Center, which is overseen by Penn State Health and is the only teaching hospital in the region. One of the goals is to provide nearby access to care for residents through existing independent physicians at affiliated hospitals rather than funneling patients to Hershey. 

A long time coming for collaboration

Highmark and Penn State Health had an established relationship for years but began serious negotiations to partner about 18 months ago, Highmark President Deborah Rice-Johnson said during a phone call Monday with HealthLeaders Media. The arrangement seems to be unique in the U.S., she added.   

Penn State Health CEO A. Craig Hillemeier, MD, said the partnership will expand the scope of Hershey’s role, currently operating as a closed-model system, as it redevelops the role of a standalone academic medical center.

The move comes a few months after the University of Pittsburgh Medical Center, one of Penn State Health’s main competitors, merged with Pinnacle Health.

Penn State Health previously tried to merge with Pinnacle, but the move was blocked by the Federal Trade Commission.

‘A model for the rest of the country’?

The collaboration is not based on a prescribed approach, Penn State Health CFO Steve Massini said during the call. Rather, both companies will work to provide appropriate solutions specific to certain markets while ensuring the best value-based care, he said. This includes establishing relationships with independent community physicians as well as acquiring community hospitals similar to St. Joseph Medical Center in Berks County, which is now Penn State Health St. Joseph.

The size of the partnership is expected to bolster research and data analytics to address heart disease, diabetes, and other chronic health issues, said David L. Holmberg, president and CEO of Highmark Health.

“There’s an argument that would suggest the future of healthcare may well be decided in Pennsylvania through these partnerships,” Holmberg said. “As everybody’s been struggling to try to figure it out on the national level, there are forward-thinking organizations like Highmark and Penn State Health who are prepared to step in and do unconventional things to be able to ultimately bridge the gap, improve quality, and make care affordable. I think it is a model for the rest of the country, and I’d keep an eye on it.”

Advice to inspired health leaders

Accomplishing this strategic partnership took a patient approach centered on goals that aligned with both companies. All four executives said a mutual understanding of the guiding principles carried negotiations through, even in times of disagreement.

Rice-Johnson emphasized the importance of listening to the multi-disciplined teams attending each meeting, including financial and legal representatives who helped guide aspects of the negotiation to completion.

The leaders also enjoyed the support of their respective boards, including Penn State University which oversees Penn State Health. Because of the partnership, Highmark will assume a minority interest in Penn State Health in conjunction with the college.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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