Sunday, July 17, 2011

What Can Highmark's Merger with West Penn Allegheny Teach Us About the 100 Year Shift?

The ever self-promoting Disease Management Care Blog is quoted on the July 17 front page of Pittsburgh's premier newspaper, the Post Gazette.  In it, the DMCB holds forth about the Highmark Blue Cross Blue Shield merger with the West Penn Allegheny Hospital

Readers may recall prior DMCB posts (here and here) predicting the unwinding of physician-hospital alignments and the corresponding rise of physician-insurer chumminess.  While the Highmark to-do is a hospital-insurer merger, the DMCB speculates that Highmark's circumstances are skewed by a) West Penn's financial travails and b) Highmark's business need to have a low-cost inpatient alternative to the behemoth University of Pittsburgh Medical Center (UPMC) monopsony. 

The DMCB won't let a few facts get in a the way of a good generalization. It discerns the same underlying dynamic at work: consternation over rising inpatient-related costs and recognition that physicians are the key to achieving value. Look to Highmark supporting West Penn as a low-cost alternative to UPMC while it tries to curry favor and build bridges with the hospital's medical staff.


Vince Kuraitis said...

Jaan, My read is that this is entirely consistent w/ 100 Year Shift. No apology needed for generalizations.

Highmark was between rock and a hard place:
* Do nothing. WPAHS goes belly up and UPMC controls Pittsburgh market
* Acquire a hospital system in dire straights and at great cost. Prevent UPMC market control.

Hospital hard assets are basically bricks and mortar and depreciated technology. Few buyers.

In this case, buying the entire health system was the only option. Unique circumstances in Pittsburgh not likely to be replicated in other markets.

I bet Highmark places much greater value on the physician network than the hospital assets. Also note that $75 M of purchase price goes toward physician scholarships, presumably docs who would eventually practice at WPAHS.

EnoughAlready said...

The fact is, if UPMC and Highmark do not contract, it WILL HURT patient care and cost all the people who are patients of UPMC doctors and facilities but are insured by Highmark. I would even expect a few fatalities will occur that could have been avoided.

The fact is, the monopoly power of BOTH UPMC and Highmark have pushed up healthcare costs in this area. Highmark has, in the past, taken actions to keep other insurers out of this market.

The fact is BOTH of these organizations have acted contrary to the public interest at times. BOTH of these organizations act contrary to the public interest which means their non-profit status should be revoked.