Highmark Health and Penn State Health have struck a deal to work together, delivering another big change to the health care market in Central Pennsylvania.
Under the agreement, ratified by the boards of both organizations, Highmark and Penn State Health will share board members and financial resources.
At the center of the partnership are plans for a collective investment by Penn State Health and Highmark Health of more than $1 billion toward the development of a health care network anchored by Penn State Health Milton S. Hershey Medical Center.
“This is a game changer,” David Holmberg, president and CEO of Highmark Health said in a statement. “We want to collaborate with forward-thinking partners who, like us, are committed to creating a positive health care experience for members and patients. Penn State Health shares this vision and, together, we’re going to lead the change for a better model of health care in the heart of Pennsylvania.”
The arrangement launches Highmark into the position of care provider in Central Pennsylvania, where it faces competition from its Pittsburgh rival UPMC.
UPMC swooped into the region this year through an affiliation with Harrisburg-based PinnacleHealth System, now known as UPMC Pinnacle. UPMC operates both hospitals and health plans.
Pinnacle and Penn State Health had attempted to merge in 2016 but were blocked by state and federal regulators. Both organizations have now found partners from western Pennsylvania in deals that are reshaping the market in Central Pennsylvania.
Under the terms of the deal, Highmark Health will join Penn State as a member of Penn State Health, with a minority interest, giving it up to three seats on the 15-member Penn State board.
The strategic partnership does not affect patient care or insurance coverage the two organizations said. Penn State Health remains free to contract with other health insurers, while Highmark Health’s payer arm, Highmark Inc., will be free to contract with other hospitals and health systems. Existing agreements with other entities remain unchanged for both.
In their release, they highlighted a goal of positioning themselves as more effective players in the evolving health care market, where payments are increasingly tied not to volume of care but to its quality. The new model is often referred to as value-based care.
They also said they wanted to preserve the role of independent physicians in the health care system.
“This exciting partnership is a commitment by our organizations to ensure that health care delivery in our region remains patient-focused, enhances overall health and wellness and creates increased opportunity for collaboration with community physicians,” said Dr. A. Craig Hillemeier, dean of Penn State College of Medicine and CEO of Penn State Health.
Penn State Health includes Hershey Medical Center, as well as Penn State Children’s Hospital; Penn State Health St. Joseph in Berks County; Penn State Cancer Institute; and Penn State Medical Group. It employs more than 13,000 people, including 1,400 doctors, at more than 100 facilities.
Highmark, which has an office in East Pennsboro Township, employs about 40,000 people. its subsidiaries include Allegheny Health Network, a health system serving western Pennsylvania.
More details are expected Monday. Highmark and Penn State Health plan to hold a press conference to discuss the agreement.