UPMC-Highmark split to take center stage in state Supreme Court showdown

May 13-- May 13--Pennsylvania Attorney General Josh Shapiro balked at claims that his legal fight against UPMC is a ploy for political clout under the guise of acting in the public interest.

"This has nothing to do with my career, and everything to do with the good people of Western Pennsylvania who deserve to have access to health care at these health care institutions, which are nonprofits," Shapiro said. "I've made it very clear that UPMC is not following the law."

Shapiro seeks to halt the June 30 health insurance network split of rivals UPMC and Highmark, in the name of preserving affordable access to UPMC hospitals for tens of thousands of people across the region, including cancer patients, seniors and people with disabilities on Medicare Advantage insurance plans.

The state attorney general said he's feeling "very, very confident" as his legal team prepares to face off this week against UPMC before the state's highest court.

"Look, we have the best attorneys, we've got the best briefs," Shapiro told the Tribune-Review at the Allegheny County Courthouse in Downtown Pittsburgh on Thursday afternoon. "I'd rather be us than them."

UPMC, whose executives have been touting just as much optimism that the court will reject Shapiro's appeal, has slammed Shapiro's attempts at interfering with a 5-year-old, state-brokered agreement between UPMC and Highmark as unfair, illegal and a disruptive threat to health care systems statewide.

UPMC argues in court filings that Shapiro is flouting prior court rulings, usurping lawmakers and violating state and federal laws in a politically charged quest to single-handedly reshape how health care works. The health system further accuses Shapiro of siding with Highmark over the public good.

The showdown is scheduled for Thursday before the state Supreme Court in Harrisburg.

Justices are tasked with resolving a critical dispute: whether the expiration date of a 2014 consent decree between UPMC and Highmark can be changed, or at least put on hold.

The case won't decide whether Shapiro can achieve his broader goals of getting UPMC to contract with Highmark or any interested insurer "in perpetuity" and to drop a controversial prepay rule, among other demands.

But the Supreme Court's ruling will decide if Shapiro's efforts to use the decree as a vehicle to force changes on UPMC can go on.

If UPMC wins

Without intervention, the UPMC-Highmark consent decree end date is June 30, which means come July 1 efforts by Shapiro to use the document as a negotiating or legal tool will be rendered effectively moot.

The state Attorney General's Office initially became involved in the UPMC-Highmark rivalry prior to Shapiro taking office. It happened after Highmark bought the former West Penn Allegheny Health System to form Allegheny Health Network in 2012 and UPMC said it wouldn't contract with an organization that owned competing hospitals.

The decree signed in 2014 aimed to smooth the transition and shield patients from the fallout, but the systems have since clashed over its interpretation.

With less than two months until it expires, the public is left wondering what Shapiro's last-ditch legal effort following years of failed negotiations with UPMC could mean for them. Seniors signed up for 2019 Medicare Advantage plans, privately offered alternatives to traditional Medicare, on the premise that the networks would split this summer.

This past Last fall alone, the Allegheny County's helpline for seniors received 15,000 more calls than usual, said Bill McKendree of Allegheny County's APPRISE program, a state-funded service that offers free guidance to seniors regarding health insurance coverage. Many switched plans reluctantly or were forced to sever ties with longtime doctors.

"They were confused, frustrated, angry and scared," McKendree said. "This is not a marginal thing, this is not a superfluous issue. This is a big deal within our community, and it's likely to remain a big deal as we progress through June 30."

As it stands, when the decree expires, Highmark-insured patients must prepay in full for all nonemergency treatment at most UPMC hospitals starting on July 1. (Exceptions, at least through 2020, include hospitals in rural or underserved areas and places such as Western Psych and Children's Hospital of Pittsburgh.) UPMC pointed out that Highmark has been excluding some UPMC patients at its Allegheny Health Network hospitals for years.

Despite the strict prepay rule, Highmark continues to pledge to cover additional, out-of-network costs for two of its Medicare Advantage plans through the end of 2019. The insurer says it will work with patients to reimburse them as quickly as possible.

It remains unclear just how prepared Highmark will be to process prepayment reimbursements. Its leaders have said they were surprised and displeased by UPMC's Oct. 1 announcement of the controversial prepay rule and asked UPMC to reconsider.

UPMC advised those concerned about accessing its facilities to choose any other insurance plan than Highmark, such as UPMC Health Plan, a national contractor like Aetna or UnitedHealth, or traditional Medicare plans and supplemental coverage -- which must be accepted by any doctor who accepts Medicare anywhere.

UPMC criticized Shapiro for using "scare tactics" by suggesting that the network split looms "as some sort of impending catastrophe."

"Rather than an orderly wind down that all parties had desired, OAG has attempted to incite panic and disruption through repeated lawsuits and politicized tweets and press releases," UPMC wrote in a filing last week.

Shapiro has the support of Highmark, which is not a party in the Supreme Court case, but likely stands to benefit competitively should Shapiro succeed.

If trends hold, the split looks to be a boon for UPMC in terms of insurance members. Its executives touted earlier this year eclipsing Highmark in the Medicare Advantage market, boasting 37 percent of the region's share to Highmark's 26.2 percent. Highmark dominated the sector less than five years ago.

UPMC also has called in court filings for the Centers for Medicare & Medicaid Services to open an additional, special Medicare Advantage enrollment period during the first three months after the networks' split, such as July through September.

If Shapiro wins

Shapiro has argued that thousands of Highmark health insurance members would suffer financially and medically if they lose access to UPMC doctors and hospitals. He seeks emergency relief from the Supreme Court to extend or keep the UPMC-Highmark decree in place while his broader legal efforts to alter its terms play out.

He asserts that he has the right to do so because of his office's role as a watchdog over charitable organizations.

In his 73-page "petition for modification" filed Feb. 6 in Commonwealth Court, Shapiro accused UPMC of breach of fiduciary duties and violating laws regarding charities, unfair trade and consumer protection.

Now, the attorney general contends that a Commonwealth Court judge made a mistake in early April by ruling that the expiration date of the decree could not be changed. Shapiro argues that the decree includes a general modification provision that "distinctly allows modification of the entirety of the Consent Decree without restriction."

The same Commonwealth Court judge determined that the Attorney General's Office does have the authority to modify the consent decree in the name of public interest -- despite objections raised by UPMC, Senate GOP leaders and the Hospital and Healthsystem Association of Pennsylvania. That judge suggested Shapiro seek an immediate appeal, and the Supreme Court agreed to take up the case last month, leading to this week's showdown.

"I'm very, very confident in the hand that we have been dealt, and we're going to put our best foot forward and the Supreme Court will make its determination," Shapiro told the Trib on Thursday. "I've got a lot of confidence in the court."

If Shapiro can buy time or change the decree's end date, he can then advance his broader effort to rewrite it and attempt to impose a range of new requirements on UPMC, including requiring the organization to replace a majority of its board.

The attorney general appears to "really be playing hard ball," and UPMC shows no signs of giving in, said Barry R. Furrow, director of the health law program at Drexel University, who is not involved in the litigation.

Years of bitter rivalry

"The Commonwealth judge has left open the AG's claims, which gives him some bargaining power with these two giants," Furrow said. The trouble is, as years of bitter legal battles between UPMC and Highmark have shown, "These two companies don't seem to be willing to negotiate."

The pair's bitter rivalry stems from years of intensifying competition, corporate mistrust, billing disputes and aggressive growth plans through which each system has invested billions of dollars into new facilities and targeted the other's market share. Both UPMC and Highmark operate as nonprofit, "purely public charities," which means they receive tax exemptions and must pump profits back into community benefits and services that promote the public good.

Each entity took in $18.78 billion in operating revenue last year, has more than $6 billion in net assets and says it spends hundreds of millions of dollars a year on community benefits and pays hundreds of millions of dollars in taxes.

They also receive hundreds of millions of dollars in tax benefits, such as exemptions from local property taxes on nonprofit buildings.

In a court filing on Monday, Shapiro's legal team accused UPMC of pursuing profits and market dominance at the expense of the public good and treating its competition with Highmark as though the two were Apple and Microsoft or Coke and Pepsi rather than charitable organizations subsidized by taxpayers.

"Contrary to UPMC's assertions, the underlying problem in this case is not the Commonwealth's alleged fundamental ignorance about how health care works," Shapiro's team wrote. "It is that UPMC has forgotten its core mission."

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, [email protected] or via Twitter .

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