Highmark, UPMC extend relationship

Hospitals and insurers never have an easy time negotiating contracts, but the level of brinkmanship in Pittsburgh between Highmark Inc. and the University of Pittsburgh Medical Center was unusual by any measure.

In a bid to compete if it failed to get a contract with UPMC, which has more than 20 hospitals and its own health insurance company, Highmark even went as far as buying the financially ailing West Penn Allegheny Health System in a deal valued at up to $475 million when it was announced last year.

The high stakes for health care in Western Pennsylvania led to the involvement of Gov. Corbett, who announced Wednesday that the two sides had agreed to extend their relationship though the end of 2014. It had been set to expire in June 2013.

"Both UPMC and Highmark worked diligently toward this amicable resolution for the benefit of UPMC patients, Highmark subscribers, and the millions of citizens impacted by the uncertainty of their dispute," Corbett said. "I, along with the citizens of Western Pennsylvania, am pleased with this outcome."

Corbett said he was not at the negotiating table, relying instead on the mediation efforts of David F. Simon, executive vice president and chief legal officer of the Jefferson Health System in Radnor.

Before joining Jefferson, Simon was an executive at U.S. Healthcare and then Aetna. He was chair of Corbett's transition team for the Department of Insurance and cochair for the Department of Public Welfare.

The hospital market in Western Pennsylvania is much more consolidated than it is in the Philadelphia region.

UPMC's share was 58 percent in Allegheny County and 38 percent in the 10-county Southwestern Pennsylvania region for the nine months ended March 31, 2011, according to its most recent quarterly bond disclosure.

West Penn Allegheny is second-largest, with 16 percent of the market. West Penn Allegheny includes remnants of the failed Allegheny Health Education and Research Foundation, which once owned Hahnemann and other hospitals in Philadelphia.

By contrast, Jefferson, which includes Main Line Health and is the largest system in the Philadelphia region, has about 20 percent of the market in Southeastern Pennsylvania.

Terms of the Highmark-UPMC agreement were not disclosed.

Contact Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.