Vasilios “Bill” Kalogredis.

The University of Pittsburgh Medical Center (UPMC) is the predominant health care provider in western Pennsylvania with 40 hospitals and $19 billion in revenue. Highmark is a health care company that provides health, dental and eye insurance plans with 4.5 million members. Until approximately 2011, UPMC accepted Highmark's insurance plans, including its Medicare Advantage Plan. What happened in 2011 is that Highmark Health was born in the purchase by Highmark of West Penn Allegheny Health System for about half a billion dollars. Thus, Highmark and its current network of eight hospitals and 2,400 staff physicians now competes head-to-head with UPMC. UPMC responded to the 2011 transaction the next year by deciding that it would no longer accept Highmark's insurance (mind you, UPMC offers its own health plans covering more than three million individuals so it seems that neither Highmark nor UPMC is, as it were, “staying in their lane”). The narrow dispute relevant to this article arose from UPMC's decision to no longer accept Highmark's insurance.

Pennsylvania's then-attorney general (AG) stepped in anticipating that the predominant provider refusing to accept insurance from a major insurer would have negative effects on patient care. After two years of talks, in 2014, UPMC and Highmark signed consent decrees along with the AG's office and Pennsylvania's Department of Health and Insurance Department. The consent decrees focus on granting in-network access for certain populations within Highmark's membership (such as seniors) to certain of UPMC's unique or exceptional providers and hospitals.

The consent decrees do not represent an indefinite ceasefire. By their own terms, they are set to expire June 30 of this year. Recognizing the disruption that this would cause to the continuity of certain vulnerable patients' care, UPMC and Highmark announced an agreement in January related to three groups of Highmark's commercial group members. Specifically, in-network access would continue after June 30, for cancer patients, members whose geographic location leaves them with limited-care options, and patients who need critical and unique services such as transplants. This limited agreement left many of Highmark's other insureds with considerable uncertainty.

On Feb. 7, the AG's office filed a petition with the Commonwealth Court seeking to modify the consent decrees. The petition asks that the court impose modifications to, according to the AG, “protect and promote the public interest by ensuring that UPMC abides by its charitable obligations to the commonwealth of Pennsylvania.” The AG's office believes that, “UPMC is not fulfilling its obligation as a public charity.” More specifically, as the Pittsburgh Business Times reported on the day the petition was filed, a review conducted by the AG's office concluded that UPMC has failed to negotiate with self-insured employers and denied some patients insured by a competing health plan.

The modifications are more specifically as follows: require UPMC to contract with any willing insurer; require UPMC to participate in “last, best offer arbitration” if negotiations with any such insurer fails; and prohibit UPMC from engaging in what the AG terms, “excessive and unreasonable billing practices.” For obvious reasons, UPMC rejected the AG's proposals as enthusiastically as Highmark accepted them.

In fact, UPMC sued the AG's office in federal court arguing that the AG has violated the law by mandating the requirements of UPMC's insurance contracts. It claims that the AG is, “illegally taking over nonprofit healthcare.” It further claims that the AG's actions are preempted by federal laws including ERISA, the ACA and the portions of the Social Security Act addressing Medicare Advantage. UPMC also seeks an injunction preventing the AG from enforcing these new contracting requirements against nonprofit health care providers.

By way of initial response, the AG expressed an interest in re-starting negotiations with UPMC regarding the terms of the consent decrees. But UPMC said that it would present its position in court. On March 1, the AG filed a motion to dismiss UPMC's lawsuit and UPMC filed its opposition March 25. As of this writing, the U.S. District Court for the Middle District of Pennsylvania has not yet decided the issue.

Though the AG's Feb. 7, petition describes potential harm to patients in western Pennsylvania, others see the breadth of the proposals differently. The Healthcare Association of Pennsylvania (HAP) is a trade group that represents hospitals across the commonwealth. It believes that the AG's proposed requirements for nonprofit health care providers would not be limited to UPMC but would apply to other providers in very different markets than that in which UPMC operates. HAP recognizes that the AG may need to argue that the proposals apply to all Pennsylvania health care providers in order to overcome UPMC's equal protection argument in the federal matter.

As a result of this concern, HAP filed a request with the district court seeking to join UPMC's suit against the AG. HAP argues that its participation in the suit is critical to ensure that the adjudication of this narrow dispute among UPMC, Highmark and the AG does not negatively affect other, unrelated Pennsylvania health care providers. It also joins UPMC's argument that the AG's actions are pre-empted by federal law, such as the statutory provisions underlying Medicare Advantage. In a written statement, HAP's CEO Andy Carter said that the AG's “new health care regime, hastily imposed through litigation, will force cost-cutting over improving quality and outcomes.”

Meanwhile on April 3, in the suit brought by the AG, the Commonwealth Court dismissed the AG's request to extend the consent decrees beyond their June 30 deadline. On April 8, the AG filed a request with Pennsylvania's Supreme Court for permission to appeal or apply for extraordinary relief. On April 12, UPMC asked the Pennsylvania Supreme Court to deny the AG's request, arguing that the modification provisions in the consent decrees do not allow the parties to simply eliminate a deadline altogether. If the provisions could eliminate the deadline, then UPMC argues that the AG should have presented that option years ago rather than waiting until a few months before termination. On April 16, the Pennsylvania Supreme Court said that it would review the Commonwealth Court's decision to deny the AG's request to modify the termination provisions of the consent decrees. The court is scheduled to meet mid-May.

With HAP's entry into the fray and litigation ongoing at both the commonwealth and federal levels, this narrow dispute among UPMC, Highmark and the AG is potentially poised to have a broad and considerable impact on insurance coverage and health care provisions across Pennsylvania.

—Andrew Stein, an associate at Lamb McErlane who focuses on health and business law, assisted with preparing this article.

Vasilios J. Kalogredis is chairman of Lamb McErlane's health law department. He represents many medical and dental groups and thousands of individual physicians and dentists.