Highmark/WPAHS deal may be health care harbinger


So far, the Highmark drama has been in the western part of the state, with the Pittsburgh-based insurer’s proposed purchase of West Penn Allegheny Health System.

But Central Pennsylvania observers aren’t watching just because it’s a good show, or even because Highmark insures a lot of people here.

The deal matters, they say, because it’s increasingly looking as if close relationships between providers and payers, and alternative reimbursement models, are the future face of health care.

The spotlight thus far has been on Pittsburgh and the amply illustrated difficulties of balancing the interests of the payer, the provider and the people. But while enmeshed in those negotiations with WPAHS, Highmark has also been pursuing its vision — a system in which price and volume of services are based not on provider market power but on value delivered — via other avenues.

In June, Highmark announced a $275 million strategic partnership with Jefferson Regional Medical Center, a smaller organization in the Pittsburgh area. In October, Highmark announced a roughly $65 million strategic affiliation with St. Vincent Health System in Erie.

And recently, Altoona Regional Health System Medical Center in Blair County said Highmark was one of three potential affiliates it has been talking to. The others are Geisinger Health System and University of Pittsburgh Medical Center — the powerful WPAHS rival in Pittsburgh.

“It looks like Highmark’s plan is sort of to create a giant health system in the western part of the state,” said health care attorney John Greenleaf III of the Harrisburg-based firm McNees Wallace & Nurick LLC. “Whether they move east eventually, I don’t know.”

Central Pennsylvania’s health systems do have a sporadic history of discussing consolidation, Greenleaf said. However, the power dynamic is different here than in Pittsburgh.

If WPAHS fails, he said, “UPMC is really left as a main provider out there” — and for competition, “It’s usually beneficial to have at least two big systems.”

Matthew Kirk, president of The Benecon Group Inc. in Manheim Township, said he sees increasing costs and the Patient Protection and Affordable Care Act causing tectonic shifts in the health care landscape. He expects the results will be more deals like Highmark’s, whether they be purchases or partnerships or affiliations.

“Integrated delivery systems are the future of controlling costs in health care,” Kirk said. “Without the close relationship between the payment and provision of health care, the sharing of information will be difficult.”

Heather Stauffer

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