State reviewing Highmark-WPAHS deal: Public Comment Period Open

This week has seen a flurry UPMC v. Highmark activity. Namely, after months of anticipation and delays, Highmark and WPAHS finally sealed the deal and signed their Affiliation Agreement. The Pennsylvania Insurance Commissioner, the Pennsylvania Attorney General, and the Internal Revenue Service (IRS) will review the proposed affiliation, so there are still a number of bridges to cross before the deal is final. 


Public input is a necessary part of the review process, and Commissioner Consedine has committed to host two public hearings in Western Pennsylvania as part of the review. Members of the general public and interested parties can review agreement documents and submit public comment at the Pennsylvania Insurance Department website. 


Instead of attempting to summarize the entire agreement, I want to share two observations in particular. First, I have referenced the need for intervention by public officials, to remedy a Western Pennsylvania health care market that appears to be broken. Interestingly, the counter argument suggests that if the Highmark-WPAHS deal succeeds, it just might be unique enough to constitute a private market solution.


Maybe it's simply the case that drastic times and markets call for drastic measures and maneuvers. Necessity is the mother of invention, so to speak.


Second, I found Tab E of the Affiliation Agreement particularly interesting. It describes Highmark's Vision at length, specifically within the context of the need for their Affiliation. The document lists several reasons "Why the System Needs to Change," including "Overinvestment in physical assets and clinical technology." (page 11). 


Pennsylvania is one of 13 states that no longer maintains a state Certificate of Need (CON) program to regulate the capital investments of health care providers. I believe that Pennsylvania needs to reinvent and implement a new CON program, to meet the demands of the modern health care market place, while prioritizing and the health needs of communities. It seems that its Affiliation with WPAHS is leading Highmark to a similar conclusion. 


jferlo

Senator Costa forges bipartisan effort, sponsors new legislation

Senator Jay Costa has provided consistent and outstanding leadership throughout the UPMC vs. Highmark battle. A Western Pennsylvania Democrat and Leader of the Pennsylvania Senate Democratic Caucus, Senator Costa brought state Senate and House leaders together in July to initiate dialogue with UPMC and Highmark officials. 


To his credit, Senator Costa has played a critical role in keeping leaders together and moving forward with common purpose. As previously mentioned in this blog, Rep. DeLuca and Rep. Frankel have sponsored legislation to address UPMC vs. Highmark, and their bills include dozens of Republican co-sponsors. As Senator Don White recently commented, "This is about as nonpartisan a project as your going to see come out of Harrisburg." (PG Sean D. Hamill)


A couple of weeks ago, Senator Costa sponsored companion legislation to the DeLuca and Frankel bills, along with an additional proposal that forces UPMC and Highmark to reapply for their Charitable Organization status in the event that their contract terminates,

I think there is a legitimate question about [UPMC's] charitable status in part because of their concern about competition," Mr. Costa said. "Because that infers that there's a profit concern on their part, and that's not charitable."(PG Hamill)

What does UPMC think about the proposal? According to UPMC spokesman Paul Wood:

The central piece of Sen. Costa's legislation is to regulate the rates hospitals are paid for their services. This would represent a massive governmental intrusion into the healthcare marketplace...

Usually a free-market argument like this would resonate with state officials, especially Republicans. After all, Western Pennsylvania is a model 21st century "Eds and Meds" economy and we want growing industries to take root here, prosper, create jobs, and contribute to the vitality of our region. 


But not at the expense of the people's fundamental right to health care. Mr. Wood's argument duly noted,  it seems that state officials on both sides of the aisle may be willing to make an exception in this case. 


jferlo

Call and Response - hearings continue, legislative proposals emerge

This is what democracy looks like...


State legislators have heard the call from businesses, citizens and stakeholders. There have been hundreds of letters to the editor. Local media is providing consistent coverage and dissecting UPMC vs Highmark from every angle. As of this week a former Secretary of the U.S. Treasury weighed in candidly. Yet and still, the battle continues.


Apparently, the entire nation is watching. According to the stats on this blog people in Indonesia, England and Russia are tuning in. So its safe to say that "the whole world is watching."


Yesterday, the Pennsylvania House Insurance Committee held a hearing in Harrisburg regarding UPMC vs Highmark, with members of both houses in attendance. Here are some of the highlights:

"If you tell us there's nothing you can do to UPMC, you either have to get out of your job or you need to tell us what piece of legislation we have to pass," Mr. Barbin, D-Cambria, said during the hearing...

"UPMC won't listen, so now it's time for legislators to take charge," state Rep. Tony DeLuca, D-Penn Hills, said after the hearing...

"I don't know how you can force two commercial entities into a contract that they don't want to enter into," UPMC spokesman Paul Wood said in a telephone interview. "How do you force two competitors into a contract?"

[Senator] Costa said lawmakers are reluctant to intervene in disputes between private businesses but that this is an exception.... "This is one of those times where we need to take legislative action," he said after the hearing. "It's not our practice to stick our nose into private business, but, at the end of the day, this issue rises above that concern."

Rep. Dan Frankel, D-Squirrel Hill, said... "I understand they want to build a strong, successful business, but they seem to forget that this is not Wall Street and they're not selling televisions or cameras or iPads; they're providing vital health care for our community..." (PG - Tracie Mauriello)

State officials in the Legislature and Executive administration are digging deeper into UPMC vs. Highmark. So far the resulting solutions from Rep. Frankel and Rep. DeLuca each have over 60 bi-partisan co-sponsors. I expect additional proposals to emerge during the coming months, as well as in the 2012 Legislative Session.


Last week, I had the pleasure to speak with Sally Kalson from the PG about UPMC vs. Highmark. Her column has been a progressive mainstay for decades, and I was happy to share my perspective on the policy implications of UPMC vs. Highmark. After briefly discussing the issue with broad brush strokes, we discussed cost containment, access, and a variety of policy approaches

In the senator's view, the scenario has two parts -- the "nasty divorce" period, when consumer-hostages will have to be protected, and the long run, when government bodies will have to exercise their powers to maintain patient access and a level playing field...

"The Legislature created UPMC and Highmark. They exist because of the charitable trust exemptions granted in state law. We [legislators] should weigh in and guarantee that UPMC cannot exclude Highmark subscribers from their physician network during the divorce..."

The Pennsylvania Supreme Court set [Act 55] standards in a 1985 ruling. To qualify [as a charitable organization], an organization must (1) advance a charitable purpose; (2) donate a substantial portion of its services; (3) benefit a substantial class of people who are legitimate subjects of charity; (4) relieve government of some of its burden; and (5) operate entirely free from private profit motive....

... The Legislature should revive the "certificate of need" requirement that once put the brakes on overbuilding and costly health care redundancies. Hospitals had to show a demonstrated need in the community -- empire-building did not qualify -- before sinking millions into, say, a competing facility in Monroeville...

"We used to have a Health Systems Agency doing that oversight," Mr. Ferlo said. "It was so effective it was disbanded, and then costs went through the roof. We need to get back to that principle...." (PG)

In summary, there is the short-term need to prevent the "divorce," or at the very least to facilitate a smooth breakup. Thinking long-term, UPMC vs. Highmark is symptomatic of a Western PA regional health care and health insurance market that is broken, and can only be fixed through statutory remedies. A few of these remedies include reforming Act 55, enacting Certificate of Need legislation, and effectively implementing ACA provisions (new requirements for insurance rate increases and tax-exempt hospitals in particular).

In the end, improved Medicare for all is the only real solution to this crisis. I will continue to keep this end in sight as we search for remedies to UPMC vs. Highmark. 


jferlo

Recap of the PA Senate Banking and Insurance Committee Hearing

There has been a great deal of feedback and response to the September 8 Town Hall meeting, thanks in part to action items such as the below post card (which I encourage you to print and mail to Attorney General Kelly) and ongoing media coverage. Please take a moment to view additional Town Hall pictures.

On September 13, the Pennsylvania Senate Banking and Insurance Committee held a hearing about UPMC vs. Highmark at the University of Pittsburgh. Senator Don White (R-Armstrong) Chairs the Committee and deserves credit for planning and conducting a very informative session. Most of the Committee attended, in addition to myself and Senators Costa, Fontana, and Pippy. 

Among those who provided testimony were officials from West Penn Allegheny Health System (WPAHS), Pennsylvania Insurance Commissioner Michael Consedine, and Chief Deputy Attorney Generals James Donahue III and Mark Pacella (Antitrust Section and Charitable Trusts and Organizations Section, respectively). 


Please take a moment to view full testimony, video, and pictures of the hearing. A lot of new information was provided, particularly by the office of the Attorney General, which gave a thorough description of its legal powers and review protocol for transaction such as the proposed Highmark acquisition of WPAHS.

Chief Deputy Attorney General Donahue confirmed the Charitable status' of Highmark and UPMC,  and went on to describe the elements that his office will evaluate when reviewing the proposed Highmark acquisition of WPAHS:

"The scope of review varies with the specifics of each transaction, but generally seeks to ensure that the transaction is the product of due diligence after consideration of all other available alternatives; that it is free of private inurement; that full and fair value is being paid when any sale of charitable assets is implicated; that any restricted assets will remain segregated and committed to the intended charitable purposes; and that the transaction will not unduly impact the community's access and availability to health care." [emphasis added]

UPMC has said repeatedly that if Highmark acquires WPAHS, there will not be a new provider contract between UPMC and Highmark. Is UPMC effectively opposing the merger on legal grounds by refusing to negotiate?

We still have nearly a year before the UPMC-Highmark provider contract expires - this was an overarching theme of the September 13 hearing. But if the state approves Highmark's acquisition of WPAHS, how likely is it that UPMC will challenge the merger in court? 

jferlo

Town Hall Meeting Recap, Pressure Points, Next Steps

Thank you to the 350 + community leaders and citizens who attended the UPMC and Highmark: Purely Public Charities? Town Hall meeting last Thursday. Media coverage by the PG, Trib, and WTAE was certainly appreciated, although lacking and inaccurate in some respects. In the end they all got the message:

Mr. Ferlo said he brought the parties together before members of the public, elected officials and labor leaders so they could discuss what was at stake. Representatives of each side sat at tables flanking the podium, sometimes shaking their heads while the other side addressed the audience... 

Mr. Ferlo said the session was the beginning of what he hopes will be greater input and influence from the community. He said there are ways to impact the situation, including getting the state attorney general and insurance commissioner involved. There also might be cause for legislation. (PG - Dan Majors) 

"What's been missing is the people in this room," said state Sen. Jim Ferlo, D-Highland Park, who sponsored the town hall meeting on Thursday night at Soldiers & Sailors Memorial Hall & Museum in Oakland. "I think it will be a very ugly divorce unless we are involved." (Trib - Tony LaRussa)

As I outlined at the Town Hall, we need to build a campaign of actions over the next few months and they should include all pressure points:

1. Corporate campaign exposing current Board membership - most people may not be aware that 1/3 of UPMC Board is selected by Pitt and includes Chancellor Nordenburg and they have all been silent;
2. Pressure and actions aimed at PA Insurance Commissioner Michael Consedine and PA Attorney General Linda Kelly relating to Act 55 and Act 94;
3. Pressure and actions aimed at the PA House and Senate (Sen. Fontana's "tax them" proposal, etc...). Also, the Legislature has the power to re-write the 5 provisions of Act 55 to call into question UPMC's violations and leave less room for the Pa Supreme Court to wiggle;
4. Pressure on the Allegheny County Medical Society to start defending physicians who are being intimidated into silence due to restrictive contract provisions with UPMC;
5. Continued public outreach and post card campaigns. Post cards were distributed at the Town Hall, which I will share through my website and this blog in the coming days;
6. Pressure and due diligence regarding civil rights and anti-trust actions, given U.S. Justice Dept. recent decision to not get involved.

To be clear, I will be supporting Highmark's acquistion of the WPAHS and work to re-establish an ER and other critcal services at West Penn Hospital. Highmark-WPAHS need to develop an Integrated Finance and Delivery System (IFDS) similar to the UPMC model. All this remains in question until Highmark submits a formal acquisition filing with the Commonwealth (to the PA Insurance Department, specifically) and takes significant actions to consumate their deal which will cost Highmark an estimated $2 Billion. 

Throughout the process, I will continue to be advocate for single payer sustainable solutions and fight cuts in Social Security and Medicare (I believe Obama will lead effort to initiate these cuts).

jferlo

Town Hall Agenda

I look forward to the Town Hall meeting tomorrow and hope that you can join me, UPMC and Highmark officials, and what I expect will be over 300 citizens and stakeholders. Meeting agenda posted below:

UPMC and Highmark: Purely Public Charities?

TOWN HALL MEETING

Soldiers and Sailors Memorial Hall Ballroom

4141 Fifth Avenue

Pittsburgh, Pennsylvania

Thursday, September 8, 2011

7:00 p.m.

AGENDA

7:00 p.m.                 Opening comments by Senator Jim Ferlo (PA-38)

7:10 p.m.                 Daniel O’Malley, Highmark

                                 Market President for Regional Markets and Provider Contracting

7:20 p.m.                 W. Thomas McGough, UPMC

                                 Senior Vice President, Chief Legal Officer

7:30 p.m.                 Public comments and questions (3 minutes per speaker)

8:50 p.m.                 Closing comments by Senator Ferlo and adjourn

Special thanks to goes out the the organizations and stakeholder that have been organizing and educating the community about this issue (Community Collaborative Stakeholders, SEIU Healthcare PA, Consumer Health Coalition, Pennsylvania Health Access Network, the Western Pennsylvania Coalition for Single Payer Heathcare - HR 676, Healthcare for All PA, and many more). A number of them will be tabling at the Town Hall. Try to arrive early and visit their educational displays. 

jferlo

This Thursday, your voice matters

My Town Hall meeting at Soldiers and Sailors Memorial Hall ballroom is this Thursday, and I hope that you can join me for a what will be both a lively and educational event, as well as a watershed moment in the story of UPMC vs. Highmark.

On August 25, the House Insurance Committee hosted a hearing in the Allegheny County Courthouse located in Downtown Pittsburgh, to gather testimony from UPMC, Highmark, the Pennsylvania Insurance Department, the Pittsburgh Business Group on Health, the Allegheny County Bar Association, and Service Manufacturing and Commercial Business Council. 


UPMC CEO and President Jeffrey Romoff and Highmark CEO and President Dr. Kenneth Melani made rare personal appearances and provided testimony that reiterated their respective positions. To summarize: UPMC will not negotiate or enter into a new provider contract with Highmark if it acquires West Penn Allegheny Health System (WPAHS), and Highmark fully intends to acquire WPAHS.

With this as our current context, I am preparing for the Town Hall meeting with a few clear positions in mind:

1) At this time I support the Highmark-WPAHS merger, which as it has been described to date, will breathe new life into the financially distressed WPAHS and save thousands of jobs in Allegheny County.

2) I believe that morally, ethically, and legally in order to fulfill their obligations as charitable organizations under PA Act 55 of 1997, UPMC and Highmark should find common ground and reach a new provider contract that increases healthcare access and reduces healthcare costs for the residents and employers of our region.

3) Thinking long term, UPMC vs. Highmark is the symptom of failing health care and health insurance markets in Western Pennsylvania. Therefore, statutory remedies are justifiable and necessary in order correct the market. Among these remedies are reforms in the areas of the Pennsylvania charitable organization law, Certificate of Need (CON), and limiting health insurance premium increases.

My colleagues in the Pennsylvania General Assembly are clearly prepared to act decisively, and are considering the various approaches that might be taken to enact a solution if UPMC and Highmark cannot reach one voluntarily. When the citizens of Allegheny County have their say on Thursday, Harrisburg will be listening and assured that there is a groundswell of support from Western Pennsylvania residents. This Thursday your voice will make all the difference.

jferlo