UPMC facing legal action from the state

Local News

Pennsylvania Attorney General Josh Shapiro today filed a petition in Commonwealth Court to modify the consent decrees governing the relationship between UPMC and Highmark, two of the largest health care providers and insurers in the western Pennsylvania market. 

The motion requests that the court make changes to protect and promote the public interest by ensuring that UPMC abides by its charitable obligations to the state.

“Our petition today has a simple goal: to restore fairness to the healthcare system in western Pennsylvania and promote the public interest by ensuring patient access to affordable care and facilities which they have funded through their tax dollars,” Attorney General Shapiro said.  “As the Chief Law Enforcement officer for the Commonwealth of Pennsylvania, it is my constitutional mandate to ensure that charitable organizations like UPMC comply with our laws governing their conduct.  We have concluded that UPMC is not fulfilling its obligation as a public charity.”

In 2014, the state intervened in an escalating competition between UPMC and Highmark by entering into consent decrees with both organizations.  The consent decrees govern how the two entities would interact in order to prevent further harm to the public.  These protections are set to expire on June 30, 2019.

The proposed modifications which would bring both organizations into compliance with their charitable obligations and protect the public were presented to UPMC and Highmark in late 2018, to which Highmark agreed and UPMC did not, leading to today’s action.

The motion filed by Attorney General Shapiro specifically asks the Commonwealth Court to:

  • Enable open and affordable access to UPMC’s health care services and products through negotiated contracts with any health plan;
  • Require last, best-offer arbitration – commonly known as “baseball arbitration” – when contract negotiations between insurers and providers fail; and
  • Protect against UPMC’s unjust enrichment by prohibiting excessive and unreasonable billing practices inconsistent with its status as a non-profit charity providing healthcare to the public.

“Given the effect this dispute between UPMC and Highmark is having on Pennsylvanians, and the imminent expiration of the existing consent decree, we are asking the court to take action,” Shapiro said.  “These changes are absolutely necessary to prevent UPMC from inflicting further harm on the public by forsaking its charitable obligations in pursuit of commercial success.”

Even operating under the current agreement, a legal review by the Office of Attorney General’s charities and healthcare sections found that UPMC continues to engage in conduct that is in violation of its charitable obligations, including:

  • Withholding access to doctors for patients in Williamsport, Pennsylvania whose employers have contracts with a competing health plan; and
  • Refusing to negotiate reasonable payment terms with self-insured employers, resulting in UPMC’s unjust enrichment through excess reimbursements for the value of its services.

UPMC is a public, non-profit charitable institution in the state, receiving significant public support in the form of tax benefits, donations and public financing in exchange for a legal responsibility to perform services deemed valuable to the public at large.  The result of this arrangement is that UPMC saves almost $40 million dollars annually, which it would otherwise pay in property taxes to the City of Pittsburgh and Allegheny County – money that could be resourced to other public goods like safety, infrastructure, education, and more.  Additionally, between 2005 and 2017, UPMC received a total of $1.27 billion in public and private contributions and grants to support its health care, education, and research missions.

“As a public charity, especially one enjoying perpetual tax-exempt status, UPMC must behave in a manner consistent with its charitable mission in all facets of its operation,” continued Attorney General Shapiro.  “By law, it is a give-and-take relationship between UPMC and Pennsylvanians, and UPMC is taking more than its fair share from taxpayers.”

UPMC responded with this statement:

“The five-year transition as provided for by the Consent Decrees expiring June 30, 2019 has allowed businesses and consumers substantial time to prepare for the end of the UPMC-Highmark relationship in western Pennsylvania. During that period, the region’s insurance marketplace transformed from one of the nation’s most highly concentrated and least competitive to one of the most competitive and pro-consumer markets in the nation with some of the lowest cost health plans available anywhere.

Consumers have greatly benefitted from the heightened competition. Nearly all businesses now offer alternative, affordable plans so their employees can choose insurance products that allow them full, unfettered in-network access to the UPMC hospitals and physicians they desire.

As for Medicare Advantage, a federally regulated program, seniors now have more options and enjoy the benefits increased competition provides in terms of low pricing and more expansive plan design. To the extent there remains any confusion, seniors with Medicare Advantage plans have another opportunity, from January 1 through March 31, to clarify their options and switch their coverage so they have the in-network access to the providers they prefer.”  —   

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