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Analysis

Pennsylvania AG Accuses UPMC of Ignoring Charity Obligations

By John Commins  
   February 07, 2019

The state's Commonwealth Court is being asked to modify the consent decrees governing the relationship between UPMC and Highmark Inc., the largest healthcare provider and insurer in western Pennsylvania.

Pennsylvania Attorney General Josh Shapiro has filed a petition asking a state court to ensure that nonprofit UPMC meets its charitable obligations.

"Our petition today has a simple goal: to restore fairness to the healthcare system in western Pennsylvania and promote the public interest by ensuring patient access to affordable care and facilities which they have funded through their tax dollars," Shapiro said at a news conference in Pittsburgh on Thursday.

"As the Chief Law Enforcement officer for the Commonwealth of Pennsylvania, it is my constitutional mandate to ensure that charitable organizations like UPMC comply with our laws governing their conduct," Shapiro said. "We have concluded that UPMC is not fulfilling its obligation as a public charity."

Specifically, Shapiro asked the Commonwealth Court to modify the consent decrees governing the relationship between UPMC and Highmark Inc., the largest healthcare provider and insurer in western Pennsylvania.   

Shapiro's petition asks the Commonwealth Court to:

  • Enable open and affordable access to UPMC through negotiated contracts with any health plan;
     
  • Require last, best-offer arbitration when contract negotiations between insurers and providers fail;
     
  • Protect against UPMC's unjust enrichment by prohibiting excessive and unreasonable billing practices inconsistent with its status as a non-profit health system.

In 2014, Pennsylvania intervened in an ongoing contract dispute between UPMC and Highmark that ended with a five-year consent decree mandating how the stakeholders would interact. That consent decree expires on June 30, 2019.

In late 2018, Hallmark agreed to proposed modifications to the consent decree that would have brought both stakeholders into compliance with their charitable obligations. UPMC did not agree to the modifications, which prompted Shapiro to file his petition on Thursday.     

"Given the effect this dispute between UPMC and Highmark is having on Pennsylvanians, and the imminent expiration of the existing consent decree, we are asking the court to take action," Shapiro said.

"These changes are absolutely necessary to prevent UPMC from inflicting further harm on the public by forsaking its charitable obligations in pursuit of commercial success."

An AG's review of UPMC found that, even within the existing consent decree, UPMC violates its charitable obligations by:

  • Withholding access to doctors for patients in Williamsport, whose employers have contracts with a competing health plan; and
     
  • Refusing to negotiate reasonable payment terms with self-insured employers, "resulting in UPMC's unjust enrichment through excess reimbursements for the value of its services."

"As a public charity, especially one enjoying perpetual tax-exempt status, UPMC must behave in a manner consistent with its charitable mission in all facets of its operation," Shapiro said. "By law, it is a give-and-take relationship between UPMC and Pennsylvanians, and UPMC is taking more than its fair share from taxpayers."

UPMC Responds
 

Paul Wood, UPMC's chief communications officer, said the consent decree no longer needs to be renewed because the five-year consent decree created sufficient competition among insurers in western Pennsylvania.  

"During that period, the region's insurance marketplace transformed from one of the nation's most highly concentrated and least competitive to one of the most competitive and pro-consumer markets in the nation with some of the lowest cost health plans available anywhere," he said.

That competition, Wood said, allows businesses to "offer alternative, affordable plans so their employees can choose insurance products that allow them full, unfettered in-network access to the UPMC hospitals and physicians they desire."  

Highmark Chimes In
 

Highmark President and CEO David Holmberg said Shapiro's petition "is in the best interest of the communities we serve."

"We fully agree with the principle of preserving health care choice for all consumers; the sustainability of tiered, high-performance network health plans to meet consumer demand for quality, affordable care; and ensuring healthcare competition," Holmberg said in a media release.

"We've always believed that a level playing field should exist among health insurance companies and healthcare providers. We believe that all health plans and health systems should compete based on their value to the consumer," he said.

Alan Murray, a senior vice president with Moody's Investors Service, said requiring UPMC to continue to provide open access to its providers and hospitals would be a credit positive for Highmark.

"The petition – if ultimately successful – would enable Highmark to compete more effectively for customers, and to provide its insureds with expanded access to healthcare providers and facilities following the expected expiration of a consent decree on June 30,” Murray said.

“By law, it is a give-and-take relationship between UPMC and Pennsylvanians, and UPMC is taking more than its fair share from taxpayers”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Pennsylvania AG Josh Shapiro wants a judge to mandate an agreement between UPMC and Highmark before their existing five-year consent decree expires on June 30.

Shapiro contends that UPMC is not fulfilling its charitable obligations under state law.

UPMC says the consent decree is no longer needed because there is sufficient competition among payers and providers in western Pennsylvania.


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