The UPMC/Highmark rivalry continues to open new fronts in Pennsylvania. Highmark’s response to UPMC is differentiated in two ways: first, Highmark is using a coalition-building strategy and, second, it is controlling its exposure to big in-patient assets; in contrast, UPMC is building an integrated, single-brand system and happily taking over hospitals (and building more) along the way. When UPMC and Highmark make major investments in a region, local systems will be caught in the capex arms and feel the pressure to affiliate. Credibly threatening to respond in kind may defuse the arms race. But unaffiliated systems may struggle to find partners willing to bankroll a battle with both Highmark and UPMC, leaving no option for unaligned systems than to pick sides. Philadelphia systems – so far largely neutral to Highmark vs. UPMC – should be able to stay neutral as the fight develops in their western backyard. If the battle moves into northeastern Pennsylvania or jumps into south Jersey, however, the Philadelphia systems will have to develop a response.
The competitive rivalry between Highmark and UPMC is truly epic. Long ago – when Highmark largely focused on insurance and UPMC largely focused on care delivery — they were good partners in the Pittsburgh market. But as each has become more vertically integrated – with Highmark acquiring the West Penn Allegheny system and UPMC’s health plan buisness growing – they have since become bitter rivals. The competition has expanded out of Western Pennsylvania and into the rest of the state.
Now that the Supreme Court has upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA), health insurers are scrambling to reinvent themselves for a new era. In an earlier post, I quoted Aetna CEO Mark Bertolini as saying he wants to create a business model that makes sense under the new rules and regulations. In a recent speech Bertolini explained, “We need to move the system from underwriting risk to managing populations. We want to have a different relationship with the providers, physicians and hospitals we do business with.”
Starting with Aetna, this analysis will examine the ways that insurance companies are trying to reinvent themselves for a reformed health care delivery system that often wonders why we need health insurers at all.
Early this year, Aetna decided to evolve “’from an insurance carrier to a health solutions company.” ”The head of brand and consumer marketing at Aetna stated, “’More and more, the end consumer is who we need to focus on.’” Aetna has developed Care Pass Platform, an agnostic tool that all consumers can use to aggregate and organize their fitness, medical, insurance and nutrition data. Aetna is also partnering with Medicity to provide smartphone apps for providers and iTriage to provide apps for consumers.
I know that secretly you’re all bored of this Supreme Court nonsense, and want to get back to the real business of health care, which is often the ongoing war between regional insurers and regional health systems. And the war in Pittsburgh between Highmark and UPMC has been as fierce as anywhere. But it’s been lacking in the kind of juice that makes for a good Friday afternoon scandal. Until now.
Last Sunday Highmark CEO Ken Melani got arrested. (This is a real arrest not one of the fake kind featured in last Friday’s funny). Melani’s mistress was some 25 years younger than him and had been working for him at Highmark. That then progressed to her moving in with him. But after an argument with Melani last Sunday she went back to her husband’s place. Melani went around there and apparently accused her of only wanting him for his money –he was on about $4.5m a year–and ended up in a fist fight with her husband. Apparently his mistress wasn’t leaving him for good and wasn’t intending to get back with her husband, but one policeman apparently heard Melani say that he’d have killed both of them if the police hadn’t stopped him. Either way it’s juicy stuff for health care.
Highmark is in the process of buying the only non-UPMC chain in Pittsburgh, West Penn Allegheny, and is still trying to get to a contract with UPMC that keeps it playing in the town–which UPMC of course dominates. Melani is now on unpaid leave and presumably not coming back any time soon, while as of today Highmark Chairman Robert Baum has taken the reins.
This may end up meaning nothing in the ongoing UPMC/Highmark battle, but I do sit here musing that the only way this would have been better for the Friday Funny is if the mistress in question had been UPMC’s CEO Jeffrey Romoff’s wife–who herself is some 30 years younger than Romoff and happens to be wife number 4. But as the Rolling Stones say, you can’t get everything you want!