Western Maryland Health System, UPMC to pursue merger


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Cumberland, Md.-based Western Maryland Health System has signed a nonbinding letter of intent with Pittsburgh-based UPMC to pursue a merger.

The systems entered a clinical affiliation in February 2018.  Over the next few months they will engage in further due diligence and research to reach a definitive merger agreement.

A merger would “allow WMHS to maintain clinical excellence in western Maryland and throughout the region for years to come,” said Barry Ronan, president and CEO of the Maryland health system. “Since we became clinically affiliated with UPMC in 2018, we have a stronger clinical and operational position, allowing a broad range of nationally recognized care here locally for the people of Allegany County and surrounding counties in Maryland, Pennsylvania and West Virginia.”



UPMC fires back at state AG, seeks to join BCBS antitrust lawsuit


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University of Pittsburgh Medical Center filed a counter lawsuit on Thursday against the Pennsylvania attorney general, who is seeking to force the healthcare giant into contracting with rival Highmark. The system is also seeking to insert itself in a broader lawsuit over the ways Blues operate.

The flurry of filings taps into big questions over payer competition and underscores tensions seen throughout the country between insurance companies and providers as they negotiate contracts, particularly in highly concentrated markets. States have stepped up their enforcement of consumer protections against rising healthcare costs — but UPMC is saying its regulators have greatly overstepped their bounds. 

Earlier this month, Shapiro alleged Pittsburgh’s dominant medical provider wasn’t living up to its charitable mission as a nonprofit, accusing the health system of “forsaking its charitable obligations” in exchange for “corporate greed.”

The legal duel stems from a contract dispute between UPMC and its rival Highmark. Until June 30, the two have a legal agreement protecting consumer access to the other’s network through a consent decree. UPMC refuses to modify the decree and contract with Highmark, which risks in-network access to UPMC hospitals for Highmark members.

In response to the attorney general’s initial complaint, UPMC alleges that Shapiro’s attempt to renew and modify an expiring agreement between the Pittsburgh health system and Highmark is “unprecedented and unwarranted.”  The modification would, among other things, remove the majority of UPMC’s board of directors and force the integrated system to contract with any payer. 

The state AG responded on Friday, accusing UPMC of ignoring its mission and noting it would not be intimated by the healthcare behemoth.

“With their filings today, UPMC has shown they intend to spend countless hours and untold resources on a legal battle instead of focusing on their stated mission as a non-profit charity — promoting the public interest and providing patient access to affordable health care,” said Attorney General’s Office spokesman Joe Grace.

In its notice to the AG, UPMC lays out five examples it calls frivolous enough to get Shapiro’s motion dismissed — including previous testimony delivered by Deputy Attorney General Jim Donahue in 2014, when he told state representatives there is “no statutory basis” to make the two companies contract with each other without setting a dangerous economic precedent.

“If we force the resolution in this case, we really could not avoid trying to force a similar resolution in all those other situations, and that is simply and unworkable method of dealing with these problems,” Donahue said at the time. “We’d be putting our finger on the scale, so to speak … and we’re not sure what those effects would be.”

One effect is a class action lawsuit, which UPMC filed separately Thursday. It alleges Shapiro has violated at least four federal laws: Medicare Advantage statutes protecting competition, the Affordable Care Act’s nonprofit payer regulations and the Sherman Act and the Employee Retirement Income Security Act of 1974.

“Purporting to act in his official capacity, General Shapiro has illegally taken over nonprofit healthcare in the Commonwealth of Pennsylvania,” UPMC’s class action states. “Without rulemaking, legislation or public comment, General Shapiro has announced new ‘principles’ that radically (and often in direct contravention of existing federal and state law) change how nonprofit health insurers and providers operate, now rendering the Attorney General the arbiter of how nonprofit health organizations should envision and achieve their mission.”

UPMC says Blues system bad for business

Separate from its battle with the state attorney general, UPMC is attempting to jump in the middle of a legal antitrust battle over how Blue Cross Blue Shield plans operate. UPMC is seeking both a preliminary injunction and a motion to intervene in the years-long federal case in Alabama.

UPMC is asking the Alabama court to stop the Blues plans from enforcing their own market allocation agreements that prevent UPMC from contracting with other Blues plans, according to the filing. UPMC says a significant chunk of its patients have a Blue Cross Blue Shield plan from a different provider other than Highmark.

Joe Whatley, co-lead counsel for provider plaintiffs in the Alabama case, told Healthcare Dive UPMC “presents a good example of how the Blues are abusing their illegal agreement for their benefit and to harm healthcare providers throughout the country.”

UPMC argues that it would contract with other Blue Cross Blue Shield plans, separate from Highmark, but cannot due to the way Blues operate — or limit how they compete with one another. BCBS plans tend to stake out their own geographic areas and avoid competition with one another, a practice the Alabama court has already found is in violation of antitrust laws. A BCBS appeal to the Alabama judge’s opinion was already struck down by the 11th U.S. Circuit Court of Appeals late last year.

UPMC is asking the Alabama court for an injunction, or to step in and stop the Blues plans from enforcing or complying with their own market allocation agreements that are preventing UPMC from contracting with other Blues plans, according to the filing. And because the hometown plan, Highmark, does not have a contract with UPMC after June 30, it means that other Blues plan members that have enjoyed in-network access to UPMC will soon lose access after the consent decree expires.

About 24% of UPMC’s hospital patients have a Blue Cross Blue Shield plan other than Highmark.

UPMC contends that it has tried to contract with other Blues but was turned down. “The average non-Highmark Blues patient does not know that UPMC has offered contracts to each of these plans and been turned down because the Blues’ illegal market allocation prevents them entering into such an agreement with UPMC,” according to the filing.

Without an injunction, UPMC alleges it will suffer irreparable harm to its reputation and will lose a significant number of patients who have a non-Highmark Blues plans.

The Pennsylvania attorney general’s office has not responded to Healthcare Dive’s request for comment and UPMC declined to discuss the case further.





Financial updates from Banner, Kaiser, Mayo + 3 other health systems


The following six health systems recently released their financial statements for the nine-month period ended Sept. 30:

1. Phoenix-based Banner Health’s revenue climbed 7.2 percent year over year to $6.3 billion in the first nine months of 2018. The system ended the first nine months of this year with operating income of $122.1 million, down 37 percent from $192.9 million in the same period a year earlier.

2. Oakland, Calif.-based Kaiser Permanente’s revenue climbed to $59.7 billion in the first nine months of 2018, up 9.6 percent from revenue of $54.5 billion in the same period of 2017. Kaiser ended the first nine months of this year with operating income of $2.03 billion, compared to $2.33 billion in the same period of 2017.

3. Rochester, Minn.-based Mayo Clinic ended the first nine months of 2018 with revenue of $9.5 billion, compared to $8.8 billion in the same period of 2017. The system reported operating income of $601 million in the nine months ended Sept. 30, up 32 percent from the same period of 2017.

4. Bronx, N.Y.-based Montefiore Health System recorded revenue of $4.4 billion in the nine months ended Sept. 30, up from $4.1 billion in the same period a year earlier. The system ended the first nine months of this year with operating income of $59.6 million, up from $37.7 million in the same period of the year prior.

5. Arlington-based Texas Health Resources recorded revenue of $3.5 billion in the first nine months of 2018, up from $3.4 billion in the same period a year earlier. The system ended the first nine months of this year with operating income of $168.7 million, down from $174.5 million in the same period of 2017.

6. Pittsburgh-based UPMC reported revenue of $13.9 billion in the first nine months of this year, up from $11.4 billion in the same period of 2017. The system ended the first nine months of 2018 with operating income of $190 million, down from $196 million in the same period of 2017.


Advocate Aurora raising minimum wage to $15/hour


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Dive Brief:

  • Advocate Aurora Health, a 27-hospital non-profit health system covering Illinois and Wisconsin, announced it will increase its minimum wage to $15 an hour by early 2021. The system plans to make the increase in steps, reaching $13 an hour in the middle of next year and $14 in early 2020.
  • In a message to staff, Kevin Brady, chief human resources office at Advocate Aurora, said the pay raise “aligns with our longstanding commitment to be market competitive and remain a place that attracts and retains top talent.”
  • It’s the latest in a growing list of health systems that are raising minimum wages. Allegheny Health Network and UPMC also set targets of $15 an hour this year.

Dive Insight:

Health systems are making these moves as they struggle to find employees in the competitive job market. Labor costs remain a major issue for hospitals and have led to nursing strikes over the past two years.

A recent Navigant analysis predicted hospitals and health systems will continue to see higher labor costs in the coming years as administrators raise wages to tackle shortages. Total employment compensation for the industry increased 2% in 2017 and 2.3% the previous year, according to the Bureau of Labor Statistics employment cost index.

Many states are also moving forward with minimum wage increases, including some that have increased pay to $15 an hour.

Brady said the health system’s goal is to be a “destination employer where our team members feel valued, have opportunities for growth and connect with our values and purpose-driven culture.” The decision will improve the workplace and, in turn, make patients “feel this is the best place to entrust their health and wellness,” he added.

Brady said the health system is investing in higher pay while still facing shrinking reimbursements and rising pharmaceutical costs. “Continuing to ensure that our team members have access to rewarding jobs with comprehensive benefits, competitive wages and an engaging work environment will not only strengthen our workplace, it will strengthen our marketplace and most importantly, enhance the quality of life in our communities from Green Bay to Bloomington Normal and everywhere in between,” he wrote to staff.

The Downers Grove, Illinois-based health system was created earlier this year with the merger of Advocate Health Care and Aurora Health Care. The system experienced a 20% drop in operating income in the first six months. The decrease was related to added costs connected to the merger and a new EHR.

UPMC physician among 11 killed in Pittsburgh synagogue shooting


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Jerry Rabinowitz, MD, was among the at least 11 people killed after a man opened fire at the Tree of Life synagogue in Squirrel Hill, Pa., early Oct. 27, according to NBC News.

Here are six things to know:

1. Robert Bowers, 46, entered the synagogue Oct. 27 armed with an AR-15 semi-automatic rifle and three handguns, CBS News reports. The incident lasted roughly 20 minutes, during which 11 people were killed and at least six were injured. Mr. Bowers eventually surrendered himself to police.

2. During the shooting, Mr. Bowers reportedly expressed hatred toward Jewish people, according to a charging document obtained by CBS News. Federal prosecutors are seeking approval to pursue the death penalty against Mr. Bowers, who is expected to make his first court appearance Oct. 29.

3. Among the 11 killed was Dr. Rabinowitz, a 66-year-old primary care physician from Edgewood Borough, Pa., according to CNN. In a Facebook post Oct. 28, Dr. Rabinowitz’s nephew said, “When [Dr. Rabinowitz] heard shots he ran outside to try and see if anyone was hurt and needed a doctor. … That was Uncle Jerry, that’s just what he did.”

4. Dr. Rabinowitz was affiliated with Pittsburgh-based UPMC. Tami Minnier, BSN, MSN, RN, chief quality officer of Pittsburgh-based UPMC Shadyside, told the Pittsburgh Post-Gazette, “The UPMC family, in particular UPMC Shadyside, cannot even begin to express the sadness and grief we feel over the loss of Dr. Jerry Rabinowitz.”

5. A spokesperson for the district attorney’s office also told the Pittsburgh Post-Gazette Dr. Rabinowitz served as the personal physician for former deputy district attorney Law Claus for 30 years.

6. Pittsburgh-based UPMC and Allegheny Health Network treated seven victims of the shooting. Three UPMC physicians, Pittsburgh Emergency Medical Services and other first responders arrived on the scene within a half-hour of the shooting.



UPMC, Highmark face off over out-of-network prepayment rule: 5 things to know


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A state-brokered consent decree between Pittsburgh rivals Highmark Health and UPMC expires June 30, 2019, after which Highmark’s Medicare Advantage members will be unable to access UPMC at in-network rates. A recent report from Trib Live found the systems are clashing over a new rule concerning how some nonemergent care will be paid for by out-of-network Highmark members.

Here are five things to know:

1. Beginning in July, Highmark MA members will have to pay any estimated upfront charges for nonemergent treatment in full before accessing care from most UPMC providers, UPMC said in an Oct. 1 internal memo.

2. For example, a Highmark MA member wishing to schedule a surgery next July at most UPMC hospitals will have to request an estimate for the service from UPMC and pay it in full before undergoing surgery, according to Trib Live, which cites the internal memo.

3. Partial payments or arranged payment plans will not be accepted, according to UPMC. “If you choose to access nonemergency care from a UPMC provider that is out-of-network, you will be required to pay in advance,” a UPMC mailer sent to patients explains. It adds that patients can maintain in-network access to UPMC through plans sold by Aetna, its subsidiary Coventry, Cigna and UnitedHealthcare.

4. Highmark officials were surprised by the new rule. They told Trib Live the mandate is “an extremely unusual” move by UPMC. A Highmark spokesperson told the publication the rule runs counter to other “providers across the nation, when our Medicare Advantage members travel and may see an out-of-network provider.”

5. A UPMC spokesperson told Trib Live the system sent out the Oct. 1 memo to physicians “because we didn’t want any of their patients to be surprised.”


Pittsburgh council greenlights UPMC’s $400M expansion plan


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Although area residents, union members and community activists spoke out against the project, the Pittsburgh City Council approved Pittsburgh-based UPMC’s proposal for a $400 million expansion, according to a Tribune Review report.

Thirty-seven people spoke in opposition of UPMC’s plan to expand its Mercy complex in Pittsburgh during a discordant meeting July 31 that lasted more than five hours. The critics demanded the hospital giant allow employees to unionize, pay more in wages and accept all patients, including ones without insurance.

Despite objection, the city council approved the project in a 7-2 vote after a councilman negotiated with the hospital giant. In the negotiations, UPMC agreed to provide an addiction clinic, mental health services and job opportunities for minorities as it moves forward with its construction plans.

The $400 million project is part of a $2 billion systemwide expansion UPMC announced last year. Plans for UPMC Mercy hospital call for a vision and rehabilitation hospital that has a specialty research and treatment center for eye ailments.

“We look forward to moving ahead with construction of the UPMC Vision and Rehabilitation Hospital at UPMC Mercy and continuing our work on initiatives to benefit the Uptown and Hill District neighborhoods and residents,” Paul Wood, a UPMC spokesperson told the Tribune Review.



Adventist Health’s net income nears $230M in FY17


Dive Brief:

  • Adventist Health’s net income grew 366% to $229.8 million in fiscal year 2017, up from $169.1 million in 2016.
  • Operating income was $203.9 million for the year ended Dec. 31, an 11.6% increase from $812.8 million the previous year, according to recent released financial documents.
  • The 90-hospital, Roseville, CA-based nonprofit health system reported $4.1 billion in revenue, a 5.8% gain over 2016’s $3.9 billion.

Dive Insight:

Adventist’s rosy performance gain reflects at least a short-term upward trend in financials as nonprofits show some signs of bouncing back from several years of rough currents fueled by shrinking volumes and reimbursement cuts. Geisinger Health System saw net income jump nearly $200 million to $324.9 million in the first half of fiscal year 2018, compared with the prior year, providing an excess margin of 9%.

Mayo Clinic reported $707 million in operating income and $12 billion in revenue for 2017, an increase of more than $225 million and $1 billion, respectively, from the previous year. Meanwhile, UPMC’s net income rose to $1.3 billion last year, spurred by strong operating and investing results and integration of UPMC Pinnacle into UPMC operations. Operating revenue and operating income also increased.

Adventist is looking to expand its brand footprint. Earlier this month, the system inked a deal to acquire Florida-based 421-bed Munroe Regional Medical Center from Community Health Systems. It has also broadened its reach in northern California through an affiliation agreement with Fremont-Rideout Health Group, which become effective at the first of this month.

Net patient service revenue at Adventist was $3.8 billion, up from $3.6 billion a year earlier. Total expenses rose to $3.9 billion, versus $3.7 billion in 2016. Of that, $1.9 billion was for employee compensation. The system recorded total cash and investments of $1.9 billion for last year.

Occupancy of licensed beds stayed mostly flat at 55.6% across the system. Average length of stay was down slightly and outpatient revenues as a percentage of gross patient revenue was down to 44.7% from 45.1% in 2016.


UPMC bonds would fund major health care spending in midstate


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Health care giant University of Pittsburgh Medical Center plans to spend $235 million in the Harrisburg, York and Lancaster areas in 2018. Much of it would go toward a new hospital in York, with some also spent at three other midstate hospitals.

Another $235 million could “potentially” go toward refinancing the loan Harrisburg-based PinnacleHealth System used for its recent purchase of four hospitals. UPMC and PinnacleHealth are in the process of merging, although the transaction still needs government approval.

The building plans were revealed Thursday during a public hearing on raplidly-expanding UPMC’s application for a bond issue through the Pennsylvania Economic Development Financing Authority. UPMC expects to receive $750 million from the bonds,

About $350 million would be used to pay off prior debt and about $400 would go toward new building projects and renovations. All told, UPMC plans to spend $900,000 million on building projects and related upgrades in western and central Pennsylvania in 2018, according to UPMC’s Simon Goehring, who represented UPMC at Thursday’s hearing.

UPMC now covers more than half the state — much more than any other system.

While PEDFA serves as a conduit for selling the bonds, there is no taxpayer funding involved in the bond issue or the funds UPMC would receive, PEDFA Executive Director Steve Drizos said. Going through PEDFA will enable UPMC to sell bonds that are exempt from state and federal interest taxes, resulting in lower costs for bond buyers, and lower financing costs for UPMC.

At Thursday’s legally-required public hearing, Dan Dorsheimer of AIA Benefits Resource Group asked whether UPMC plans to stops accepting any health insurance plans at the central Pennsylvania health care facilities that will come under its umbrella as a result of the PinnacleHealth merger.

Goehring replied that UPMC has no short-term plans to shut out any insurers, but “I can’t say in the long run how things will turn out.” UPMC is unusual among health systems in that it also owns a health insurance company.

In the Pittsburgh region, a dispute between UPMC and health insurer Highmark resulted in UPMC no longer accepting Highmark coverage.

Dorsheimer, whose firm manages employer health benefits and also is an insurance broker, said it’s “disruptive” and detrimental to health care consumers when any local health care providers won’t accept their health insurance.

“You witnessed what went on in Pittsburgh. It’s been very disruptive,” he said following the hearing.

The $235 million that will be spent in the midstate will be concentrated at facilities including Carlisle Regional Medical Center, York Memorial Hospital, which is being replaced, Lancaster Regional Medical Center, and Heart of Lancaster Regional Medical Center. Those are the four recently acquired by PinnacleHealth for $231 million.

PinnacleHealth is one of the region’s largest health care providers

Goehring also said UPMC also plans to spend some of the bond funds on a new hospital in the Pittsburgh area. Some also will be spent in north central Pennsylvania, where UPMC has acquired or plans to acquire several hospitals including the former Susquehanna Health.

A PEDFA committee has already approved the UPMC bond application. Final approval comes from Gov. Tom Wolf. Historically, the governor has typically approved applications that have been approved by the executive board, Drizos said.

UPMC moves ahead on purchase of PinnacleHealth


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Dive Brief:

  • UPMC have reached a definitive agreement to with Harrisburg-based PinnacleHealth to be acquired, Philly.com reports.
  • The deal paves the way for UPMC to expand its market share in central Pennsylvania and compete directly with the University of Pennsylvania Health System, which owns Lancaster General Health.
  • Last month, Pinnacle bought four central Pennsylvania hospitals from Community Health Systems, a Tennessee-based hospital chain. The purchase included Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center.

Dive Insight:

The deal, first announced in March, is UPMC’s largest ever and the first to involve an entire health system. Previous purchases have involved single hospitals, the most recent being Sunbury Community Hospital and Lock Haven Hospital from Quorum Health. Those hospitals will become part of Williamsport, Pa.-based UPMC Susquehanna, which was added to the UPMC system last fall.

With Pinnacle’s acquisition now on track, UPMC also stands to boost its health insurance product line, which accounted for close to half of its 2016 operating revenue. The move will pit UPMC Health Plan against Capital BlueCross and Highmark, which together have 75% of the central Pennsylvania market. Aetna holds the rest.

Gaining a foothold in the Harrisburg region could help to compete with Highmark, which four years ago bought Pittsburgh-based Allegheny Health Network, putting it in direct competition with UPMC’s medical and coverage operations.

Merger and acquisition activity has kept up a steady pace this year, with no signs of abating. Reasons for deals include declining admissions, rising costs and a desire to expand into new regions or service lines.

In May, Cleveland Clinic and Dover, Ohio-based Union Hospital signed a letter of intent to merge Union into Cleveland Clinic. The move will expand Cleveland Clinic’s footprint into southern Ohio, while bringing new services and resources to Union, officials said at the time.

Cleveland Clinic CEO Toby Cosgrove, who is stepping down later this year, said in April that consolidation and a greater focus on telemedicine would help providers transition from volume to value payment as healthcare reform continues to evolve.

UPMC expects to complete the acquisition September 1, pending regulatory approvals. For the fiscal year ended June 30, 2016, Pinnacle reported revenue of $1.05 billion.