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UPMC hearing gives glimpse into bitter Highmark feud

James Donohue.jpg

In this Nov. 18, 2015, file photo, Pennsylvania Attorney General deputy James A. Donahue III, left, prepares to testify during a Senate committee hearing in Harrisburg, Pa. The state called Donahue as a witness Monday. (AP Photo/Marc Levy)

Two days, three witnesses and hundreds of pages of exhibits all boil down to one question: Did UPMC agree to a clause that would give the state a chance to extend its 2014 agreement with UPMC and Highmark?

At stake is whether people with Highmark insurance will still be able to access UPMC care after that agreement’s June 30 expiration date, or whether they’ll face exorbitant out-of-network rates.

Executive Deputy Attorney General Jonathan Scott Goldman made the case that UPMC, stacked with elite attorneys and expensive outside counsel, should have fully understood in 2014 that a “modification provision” in the agreement gives the state the right to change the agreement’s expiration date.

UPMC attorney Lee DeJulius made the case that UPMC never would have agreed to an extension and provided emails he says show it had twice rejected such an idea.

Through dozens of emails and internal documents shown as exhibits, the Commonwealth Court hearing gave a glimpse into the bitter turf war between the two Pittsburgh-based health systems.

Because the two companies wouldn’t meet in person in 2014, the state had to negotiate with them separately. Scanned copies of hand-written notes in the margins of legal documents were emailed from UPMC to state agencies, which then had to interpret those documents to communicate with Highmark.

“The biggest issue was that UPMC would not sit with Highmark, would not be in the same room with Highmark, and wouldn’t share the same documents with Highmark,” said witness James Donahue III, an executive deputy attorney general.

UPMC saw the modification clause in the agreement as a way to fix small errors that may happen as a result of those “warp speed” negotiations, said witness Tom McGough, UPMC Chief Legal Counsel.

Never did UPMC think the modification clause would be used to change the five-year term limit, which UPMC considered a “core principle” of the agreement, McGough said.

“To me, that would be fraud, to consciously put back into an agreement something that had been explicitly negotiated out 24 hours before,” McGough said. “It would be inconceivable.”

Goldman said UPMC agreed to the terms willingly and under the review of “sophisticated” legal counsel, at one point noting that at least three of UPMC’s attorneys in court that day are former U.S. Supreme Court legal clerks. If UPMC failed to add a “carve-out” in the clause, it couldn’t “go back in time” to change what was meant by it.

“Mistakes were made,” Goldman said. “Sometimes the simplest explanation is the best one.” 

The three witnesses — all attorneys — recounted a story long-familiar to people in Western Pennsylvania.

Testimony by Highmark Chief Legal Officer Thomas VanKirk and McGough said that tension came to a head when Highmark acquired the struggling West Penn Allegheny Health System in Pittsburgh and UPMC chose not to renew insurance contracts with the company, seeing it as a competitor.

That led to the 2014 consent decree brokered by Republican Gov. Tom Corbett, the attorney general’s office and the state  departments of insurance and health departments.

VanKirk also shed light on why Highmark spent millions to acquire a 20 percent interest in Hershey-based Penn State Health, even as it was focused on improving former West Penn facilities in Allegheny County.

“In fact, we were protecting ourselves from the central part of the state by acquiring Penn State Health to protect consumers, so UPMC, which had just acquired Pinnacle, couldn’t do the same thing to consumers there that it had just done in Western Pennsylvania,” VanKirk said.

At a news conference, UPMC spokesman Paul Wood said there won’t be a repeat of those fights in the midstate.

“We’re only talking about, we will not have a contract with Highmark where we compete head-to-head as hospitals, and that’s been in Pittsburgh and Erie County,” Wood said.

Commonwealth Court Judge Robert Simpson said he hopes to decide by Friday whether to allow the state to seek an extension.

UPMC has said it will appeal to the state Supreme Court if the judge rules in the attorney general’s favor.

Brett Sholtis
Brett Sholtis

Brett Sholtis was a health reporter for WITF/Transforming Health until early 2023. Sholtis is the 2021-2022 Reveal Benjamin von Sternenfels Rosenthal Grantee for Mental Health Investigative Journalism with the Rosalynn Carter Fellowships for Mental Health Journalism. His award-winning work on problem areas in mental health policy and policing helped to get a woman moved from a county jail to a psychiatric facility. Sholtis is a University of Pittsburgh graduate and a Pennsylvania Army National Guard Kosovo campaign veteran.

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