Diagnosis: Chaos! | Slag Heap

Diagnosis: Chaos!

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Granted, it's a little early for beach reading. But if you can't wait for Scott Turow's next novel to come out, perhaps this 45-page lawsuit -- filed against the city's health care leviathans this week -- will tide you over.

The lawsuit was filed by West Penn Allegheny Health System against UPMC and Highmark -- the 800-pound gorillas of Pittsburgh healthcare -- in federal court. And it makes a slew of juicy accusations. (Among them, that UPMC head Jeffrey Romoff is "obssessed" with putting West Penn out of business.)  But the gist is this:

In the summer of 2002, the lawsuit alleges, Highmark and UPMC put aside previous differences and forged a conspiracy to become a "super monopoly." As part of the pact, UPMC backed off its efforts to compete with Highmark through its UPMC Health Plan. Supposedly UPMC would also throw up hurdles to accepting insurance from national insurers like Aetna. Given UPMC's regional dominance, that would make it very hard for outside firms to come to Pittsburgh at all.

Highmark, meanwhile, allegedly started paying very favorable reimbursement rates to UPMC ... while shortchanging West Penn, and helping to hobble West Penn's finances in other ways.

For example, the lawsuit contends, Highmark rejected a bid by West Penn to refinance some hospital debt the insurance company held. The suit alleges that in November 2005, the chair of Highmark's board visited West Penn and said "Highmark could not assist [it] because UPMC would respond by either selling the UPMC Health Plan [to another insurance company] or contracting with United [a national insurer]." Either of those moves, the thinking seems to go, would create unwanted competition for Highmark.

The board chair, the lawsuit contends, "characterized Highmark's conduct as 'probably illegal.'"

West Penn also accuses UPMC of sowing doubt and misinformation about its financial health with other potential investors. Moreover, West Penn says, UPMC repeatedly tried to poach its doctors, paying them more than the market would ordinarily bear, just to undermine its competitor's services.

"During this raiding activity," the suit alleges, "UPMC repeatedly informed AGH physicians that UPMC intended to 'bury' AGH and to turn it into a nursing home." I'm assuming that's the ultimate insult in the hospital business.

And supposedly, these weren't just the big-shot celebrity doctors, either: West Penn alleges that UPMC sought to prize away every single anesthesiologist working for its rival. If such an effort were to succeed, it would effectively put West Penn out of business: Not many patients are willing to bite down on a hunk of leather during open-heart surgery. 

It's worth noting, of course, that UPMC and Highmark have already denounced the suit. Highmark points out that it signed a five-year agreement with West Penn last year. UPMC, meanwhile, says it and Highmark remain "fierce competitors." What's more, it adds ... 

UPMC did not cause WPAHS's recent $73 million financial misstatement or the Securities and Exchange Commission, the Department of Justice and the U.S. Department of Health and Human Services investigations into their management practices.

Oooh.

Obviously, none of this stuff should be taken at face value. I mean, I'd be very much surprised if Highmark's board of directors was dumb enough to walk into "enemy territory," and confess that his nonprofit's behavior was probably illegal ... and that it was being extorted by its partner in collusion. Which is more or less how the lawsuit makes it sound to me.

Too, the lawsuit notes that "Beginning in mid-2002 both companies' earnings soared. UPMC's net income rose from $23 million in 2002 to over $618 million by 2007." But UPMC is on the record claiming that the overwhelming majority of those earnings reflect gains in the stock market. That explanation seems quite credible, given how many other enterprises have seen massive profits disappear overnight.

And note too that the lawsuit stops just short of including UPMC's earnings from 2008 -- when the hosptial giant only barely finished in the black. Did the conspiracy suddenly fall apart? Maybe so: UPMC opposed Highmark's own merger aspirations last year ... strange behavior for two entities supposedly in cahoots. 

Then again, like any good conspiracy allegation, the lawsuit sure ties up a lot of nagging questions. I mean, why don't some of the country's largest insurers -- companies that could have you butchered for spare parts anywhere else in the nation -- have a larger presence here?  

Either way, the filings in this case are going to make great reading. And one way or the other, there's gonna be blood on the floor -- and not just in the OR. 

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