COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES
HEALTH COMMITTEE HEARING
STATE CAPITOL HARRISBURG, PA
MAIN CAPITOL ROOM 14 0
WEDNESDAY, DECEMBER 18, 2 013 9:09 A.M.
INFORMATIONAL HEARING ON INTEGRATED DELIVERY NETWORKS
BEFORE: HONORABLE MATTHEW BAKER, MAJORITY CHAIRMAN HONORABLE KERRY BENNINGHOFF HONORABLE BECKY CORBIN HONORABLE GARY DAY HONORABLE GLEN GRELL HONORABLE JOHN LAWRENCE HONORABLE SCOTT PETRI HONORABLE JERRY STERN HONORABLE FLORINDO FABRIZIO, DEMOCRATIC CHAIRMAN HONORABLE VANESSA BROWN HONORABLE JAMES CLAY HONORABLE MARY JO DALEY HONORABLE PAMELA DELISSIO HONORABLE JOHN SABATINA HONORABLE MIKE SCHLOSSBERG
Pennsylvania House of Representatives Commonwealth of Pennsylvania 2
ALSO IN ATTENDANCE:
REPRESENTATIVE MIKE TURZAI REPRESENTATIVE JIM CHRISTIANA REPRESENTATIVE TINA PICKETT REPRESENTATIVE MARK GILLEN REPRESENTATIVE TONY DELUCA REPRESENTATIVE DAN FRANKEL REPRESENTATIVE RICK SACCONE REPRESENTATIVE HAL ENGLISH
COMMITTEE STAFF PRESENT:
WHITNEY KROSSE MAJORITY EXECUTIVE DIRECTOR GINA STRINE MAJORITY ADMINISTRATIVE ASSISTANT NICOLE SIDLE MAJORITY RESEARCH ANALYST VALERIE BAROWSKI MAJORITY RESEARCH ANALYST
ABDOUL BARRY DEMOCRATIC EXECUTIVE DIRECTOR APRIL RUCKER DEMOCRATIC ADMINISTRATIVE ASSISTANT REBECCA SAMMON DEMOCRATIC RESEARCH ANALYST ALAN COHN DEMOCRATIC EXECUTIVE DIRECTOR OF THE INSURANCE COMMITTEE 3
I N D E X
TESTIFIERS
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NAME PAGE
REPRESENTATIVE JIM CHRISTIANA PRIME SPONSOR OF HB 1621 and 1622 ...... 9
REPRESENTATIVE DAN FRANKEL PRIME SPONSOR OF HB 1621 and 1622 ...... 17
CHARLES DAVIDSON MCA ADMINISTRATORS INC...... 24
FRANK TREMBULAK EXECUTIVE VICE PRESIDENT, CHIEF EXECUTIVE OFFICER GEISINGER HEALTH SYSTEM...... 39
SAM MARSHALL INSURANCE FEDERATION OF PENNSYLVANIA...... 57
HENRY MILLER BERKELEY RESEARCH GROUP, LLC...... 7 5
DR. WILLIAM WINKENWERDER PRESIDENT AND CEO HIGHMARK HEALTH...... 92
DEBORAH RICE-JOHNSON PRESIDENT HIGHMARK HEALTH PLAN...... 104
PAULA BUSSARD HOSPITAL AND HEALTHSYSTEM ASSOCIATION OF PA...... 113
DR. BRAD KLEIN ABINGTON NEUROLOGICAL ASSOCIATES...... 12 6
DIANE HOLDER CEO, UPMC HEALTH PLAN...... 144
TOM MCGOUGH SENIOR VICE PRESIDENT AND CHIEF LEGAL OFFICER UPMC...... 150 4
STARR ROMANO REGISTERED NURSE, UPMC ALTOONA HOSPITAL...... 167
THERESA BROWN REGISTERED NURSE, PITTSBURGH, PENNSYLVANIA...... 169
NEIL BISNO PRESIDENT, SEIU HEALTHCARE PENNSYLVANIA...... 172
CATHY DOERFLER HIGHMARK COMMUNITY BLUE CUSTOMER...... 184
BILL KAUFMAN HEALTHAMERICA MEDICARE ADVANTAGE CONSUMER MCVEYTOWN, PENNSYLVANIA...... 186
PAT HAINES SENIOR VICE PRESIDENT OF BENEFITS BOARD OF PENSIONS OF THE PRESBYTERIAN CHURCH...... 190
SUBMITTED WRITTEN TESTIMONY
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(See submitted written testimony and handouts online.) 1 5
1 P R O C E E D I N G S
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3 MAJORITY CHAIRMAN BAKER: Good morning, everyone.
4 The hour of 9:00 having arrived, the Health Committee will
5 come to order.
6 I just wanted to make a few brief opening
7 remarks, and we'll try to stay on schedule. W e ’re already
8 six or seven minutes late.
9 First of all, I'd like to thank the Members
10 who've remained here in Harrisburg for this important
11 hearing. By the size of the group, it's an extremely
12 important issue in Pennsylvania. I know we're all excited
13 to get home to our families and the festivities, so I
14 appreciate your willingness to stay for this very important
15 informational meeting.
16 I also want to thank all the testifiers, and we
17 have a full day's agenda of testifiers scheduled for today,
18 and I want to thank them for making the trip to Harrisburg
19 to provide insight and their commitments, comments,
20 concerns on integrated delivery networks.
21 Just to set the stage a little bit, I do want to
22 remind everyone here that interruptions to those testifying
23 will not be tolerated. I understand this is a contentious
24 topic and there are individuals who are very passionate on
25 both sides of the equation. The Members of this Committee 6
1 are seeking facts and information and only then can we
2 determine the best way forward, so please allow the
3 testifiers to present their information unimpeded and be
4 treated with dignity and respect.
5 We're going to remain very close to the agenda
6 that's in your packet. As you see, it's very thick. We
7 have additional information here. If we run out, please
8 let my staff know. Gina's standing here at the podium. If
9 you need any additional information, she can send it to you
10 electronically. We do have additional copies here if you
11 need one in the audience, but if we do run out, please let
12 Gina know and she'll provide it for you.
13 I know there will be times when we may not have
14 time for questions. Some of these may go unanswered, given
15 the volume of testifiers we have, but we do need to move
16 forward or we're going to be here quite late.
17 In order to attempt to answer all possible
18 questions, I will invite the Members of the Health
19 Committee and all other Members here to submit any
20 additional questions you have to my Executive Director,
21 Whitney Krosse, as well as to the Democrat Executive
22 Director, Abdoul Barry. Where's Abdoul? He will be here.
23 Okay. They will submit the question to the relevant
24 testifier, and the question and answer will be made part of
25 the record. So we do really need to move along. 7
1 With that said, I thank you again for attending,
2 and I want to turn it over to my good friend, Minority
3 Chairman Flo Fabrizio.
4 MINORITY CHAIRMAN FABRIZIO: Thank you, Mr.
5 Chairman, and I too would like to extend morning greetings
6 and welcome you and thank you for attending this hearing.
7 With the two bills before us today, House Bill
8 1621 and 1622, we venture into uncharted and unregulated
9 territory of integrated delivery networks where medical
10 treatment and health insurance are offered jointly. It’s a
11 challenging new world with insurers providing health care
12 and health care providers offering insurance. No matter
13 the eventual fates of these two bills, this is a
14 conversation that we must have and we must deal with
15 because integrated delivery networks are here and the
16 future is now.
17 Obviously, there’s been some friction, and it was
18 to be expected when competition and consolidation collide.
19 It’s no secret these bills were prompted by the friction
20 between two big players, UPMC and Highmark. While I regret
21 the timbre and the tenor of the early debate, it does focus
22 attention on the need for Pennsylvania to work crafting
23 viable regulations for all integrated delivery networks.
24 The conversation and deliberations that we have here today
25 will help determine the future health care of Pennsylvania, 8
1 and the impact of the decisions confronting us will not end
2 in this room nor just in western Pennsylvania.
3 I don't think it will be easy sorting this out,
4 particularly for a rookie like me, and I'm still on the
5 learning curve, but w e ’re trying to grasp it. But all
6 sides we know will have some valid points and some
7 compelling arguments, and I would venture to say, speaking
8 on behalf of all Committee Members, we are here to listen.
9 We ’re going to keep an open mind and w e ’re going to listen
10 to it all.
11 But when we work through all the jargon, when we
12 work through all the deliberations, when we work through
13 all the compelling arguments, the crux of the matter comes
14 down to ensuring that Pennsylvanians have fair access to
15 affordable, quality health care without impeding
16 competition, and I think we can all agree on that.
17 Pennsylvania is blessed with some of the best
18 health care networks in this country but they do little
19 good if they’re inaccessible, unaffordable and unfair. I
20 hope we don’t lose sight during the deliberations of the
21 consumer because the consumers are our neighbors and our
22 friends that deserve the best health care available, and
23 they don’t deserve the threat of being denied services or
24 being abandoned while undergoing treatment. It’s a concern
25 of all of ours, and it’s a mutual concern of everyone in 9
1 this room.
2 I look forward to the testimony and the rigorous
3 debate, and as I said before, I along with all the Members
4 of this Committee will keep an open mind.
5 As I said, we're venturing into uncharted waters
6 but the policies that must and will be launched from
7 conversations like this one that we'll have today, these
8 that we'll have today, are vital to Pennsylvania's future,
9 and I intend to look at the big picture.
10 Thank you, Mr. Chairman.
11 MAJORITY CHAIRMAN BAKER: Thank you, Mr.
12 Chairman.
13 I do want to acknowledge the presence in the room
14 of the Majority Chairman of the Insurance Committee,
15 Representative Tina Picket, Minority Chairman
16 Representative DeLuca, Speaker Sam Smith and others that
17 are here observing as well.
18 Without further ado, we will start the agenda,
19 the very long agenda that we have today, the prime sponsors
20 in chief. Representative Jim Christiana and Representative
21 Dan Frankel, who have introduced the two pieces of
22 legislation, will begin as testifiers. You may proceed
23 when you’re ready.
24 REPRESENTATIVE CHRISTIANA: Good morning, Mr.
25 Chairman. Thank you for hosting this hearing, and I also 10
1 would like to thank the Members of the Committee and other
2 Members that are here today that have delayed their
3 Christmas recess by a day. I think that should be noted,
4 the generosity and the graciousness of your Committee but
5 also the other Members of both caucuses that are here
6 today.
7 As we know, this is a very important and timely
8 discussion. As Members of the Health Committee, you are
9 clearly aware that the health care climate in America is
10 changing every day. At a national level, State and local
11 level, changes are causing citizens to develop what I've
12 called a culture of fear when it comes to their health care
13 options. On the national front, the implementation of
14 Obamacare has left millions of Americans with unanswered
15 questions about their health insurance choices and how
16 those will affect their relationships with their doctor.
17 In addition, the rapid consolidation of hospitals and
18 doctors' offices across the country and here in
19 Pennsylvania are also adding to the uncertainty.
20 You can't help but pick up a local newspaper
21 without reading about a local hospital being bought out by
22 a mega-hospital system or going to your family doctor to
23 find out that while your family doctor was an independent
24 physician for decades, they're now just an employee of a
25 mega-system. 11
1 While we may not be able to control the evolving
2 health care landscape here in Harrisburg, we can ensure
3 that Pennsylvanians have a degree of certainty about access
4 to their family doctors and their hospitals.
5 Representative Frankel and I are working together on this
6 legislation because we want Pennsylvania citizens to
7 understand that this issue is bigger than partisan
8 politics. This issue is bigger than political ideology.
9 We introduced House Bill 1621 and 1622 not to score
10 political points but because we genuinely care about
11 millions of people that are on the verge of being forced
12 out of their family doctor’s office or forced to find a
13 different hospital just because of the logo on their
14 insurance card. W e ’re also concerned about the millions of
15 more folks in this State who could be affected in years to
16 come if this issue is not addressed.
17 Pennsylvania, as the Minority Chairman said, we
18 are blessed with some of the best doctors and nurses and
19 research centers in the Nation. To think that our citizens
20 would be restricted from these state-of-the-art facilities
21 and resources not because they don’t have insurance but
22 because they have the wrong insurance, to me, this is
23 completely unacceptable.
24 I recently received a letter from a physician who
25 has practiced in Pittsburgh for nearly 25 years. He’s a 12
1 free-market conservative Republican and just for the
2 record, he's an employee of UPMC, a proud employee of UPMC,
3 but he goes on in this letter to describe the actions of
4 these organizations that we're reading so much about and
5 seeing these ad campaigns. He talks about their behavior
6 as "anti-patient," saying that they are making citizens the
7 victims of the very organizations they helped build. He
8 goes on, "They helped build these organizations with their
9 own insurance dollars, tax dollars, philanthropy,
10 volunteerism, and State and Federal grants." He
11 specifically describes hospitals as "the people's
12 institutions of care" and that hospital systems "are
13 stewards, not owners of them." I think that is important.
14 I would like to repeat if you would allow, Mr. Chairman.
15 He specifically describes hospitals as the people's
16 institutions of care, and hospital systems are stewards,
17 not owners of them. These types of conflicts, in his
18 words, are "decreasing access, increasing personal cost and
19 severing longstanding sacred relationships between patients
20 and their doctors.
21 The main purpose of this physician's letter was
22 to urge State legislators to "rescue citizen victims from
23 the anti-patient behavior." His concerns are all too
24 familiar as they are the same concerns about access and
25 choice that I have heard time and time again from my 13
1 constituents, other legislators and citizens across
2 Pennsylvania.
3 As legislators, I understand that we have a
4 tendency to approach these issues with caution, afraid of a
5 political fallout of tampering with the affairs of massive
6 corporations. We may also be concerned about interfering
7 too much in the free market of the health care industry. I
8 too am a loud critic of government intervention. It’s
9 rarely a good thing. Too many politicians believe that the
10 solution to all of our problems lies in the creation of
11 more government regulation and control. Too often,
12 politicians believe the solutions to our problems will be
13 solved in the hallways of this building but colleagues,
14 let’s not forget that the enterprises we are discussing
15 today are not treated on the New York Stock Exchange. We
16 aren’t here discussing the relationship between Apple and
17 Google. We are talking about purely public charities.
18 Folks, I ’m convinced that the consolidation of
19 hospitals and doctors’ offices and leveraging of access by
20 large health care providers demands government action to
21 protect the public interest of Pennsylvanians who either
22 now or in the future will be affected by these situations,
23 and as we know, every region of his Commonwealth or the
24 United States has a unique health care landscape. Some
25 regions have integrated delivery networks where one huge 14
1 system is in the provider business -- they operate
2 hospitals -- as well as the insurance business, they also
3 sell an insurance plan. Some markets have dynamic
4 competition where providers and insurance companies have
5 robust competition amongst each other. Some regions have a
6 dominant provider and a dominant insurer where both
7 essentially have a monopoly on their given region.
8 My point is that no matter what system you have
9 in your area or throughout the country, there are some
10 inevitable things on the horizon. Consolidation will
11 continue and even gain momentum. Large hospital systems
12 will entertain the thought of starting their own insurance
13 plan to control another segment of the health care market.
14 Large insurers will entertain the idea that they can
15 provide high-quality care more efficiently than the current
16 providers.
17 Let me be clear: these are potentially great
18 things in the marketplace. They will hopefully provide
19 greater efficiencies, increased competition and additional
20 health care options for our constituents. However, this
21 growing area of health care could lead to superpower health
22 care giants that have the power, resources and motivation
23 to restrict access for greater market share. They
24 potentially could shut out patients to force shifts in the
25 market to their own health care plan or shift the market in 15
1 order to have insurers switch to a health care plan where
2 the hospital system can demand higher reimbursement rates.
3 That sounds kind of familiar.
4 Please, colleagues, let’s not hide behind the
5 shield of intruding on the free market and let this happen
6 because the real pipeline reality is, this issue is going
7 to keep arising in areas across the State that may not be
8 talking about this, in your districts, to your
9 constituents, and hospitals and doctors’ offices in your
10 hometown. Doing nothing is not an option.
11 What’s happening right now in the Pittsburgh
12 health care market is ground zero for a broader national
13 trend. It is not simply an isolated regional fight. We
14 need to direct the conversation back to patient care and
15 how to protect patient access. If we want to pursue the
16 best quality, highest-value health care right now, we must
17 have full patient access and complete competition in the
18 insurance market as well as the provider market. This is
19 where these bills come in.
20 First and foremost, they will prevent any
21 integrated delivery network from refusing to see patients
22 because they have the wrong insurance card. There should
23 be no "wrong" insurance card when it comes to nonprofit
24 hospitals built with taxpayer dollars.
25 In addition, these bills will promote 16
1 competition. They do not limit competition like we've
2 heard from opponents of this effort. In fact, these bills
3 guarantee that every insurer is welcome in Pennsylvania.
4 No matter how large or small the health care plan is, we
5 welcome you. That is our intent, period.
6 Now, some have said the bill as drafted may not
7 explicitly be clear on that subject. Let me be very clear
8 this morning: We are happy to amend this bill to make that
9 crystal clear, that every health care plan gets a fair
10 shot. We believe that hospitals' health plans should
11 compete for customers on merit, not just on their
12 affiliations.
13 Since we introduced these proposals, we've heard
14 some opposition from various organizations, I may add, many
15 of whom have led us to this point in the first place, but
16 they are quick to accuse both us personally and the
17 legislation, of attempting to "reduce health insurance
18 competition and take away choices for consumers.” However,
19 in all of these accusations, I have yet to hear one
20 recommendation on how to strengthen these bills. I ask
21 everyone here today, if you don't like this plan, then what
22 do you like? The status quo, taking a knee to run out the
23 clock in these contracts, should not be an option.
24 I look forward to a positive discussion here
25 today on how our citizens can maintain access to affordable 17
1 medical care today and going forward.
2 Thank you, Mr. Chairman.
3 MAJORITY CHAIRMAN BAKER: Thank you,
4 Representative Christiana.
5 Representative Frankel.
6 REPRESENTATIVE FRANKEL: Thank you, Chairman
7 Baker and Chairman Fabrizio. I want to thank you for
8 making this possible, and also to your Executive Directors,
9 Whitney and Abdoul. It was great working with them to set
10 this up. I know it took a lot of work, and w e ’re very
11 receptive to some suggestions.
12 I’m also proud to be here with my colleague Jim
13 Christiana. Jim and I respectfully share very different
14 perspectives on many issues, as those of you know here, but
15 on this issue and the future of health care in
16 Pennsylvania, we have come together because we know how
17 important it is and what the future for us as a
18 Commonwealth and our citizens in terms of access and cost
19 of health care in the future, and that’s why w e ’ve worked
20 together crossing really different ideological boundaries
21 to come up with these pieces of legislation.
22 The goals of this legislation are numerous: to
23 ensure access to community institutions for our
24 constituents who helped to build them in the first place,
25 as Jim said, with our tax dollars, our charitable 18
1 contributions, our insurance premiums and our generous tax
2 exemptions. It also is meant to support a robust
3 competitive insurance market by making certain that all
4 insurers who want to create innovative insurance policies
5 can do so because they have the opportunity to contract
6 with all health care providers at a rate that is fair to
7 the health care providers but does not end up gouging our
8 consumers.
9 It also is meant to create real competition
10 between providers, not competition based on size or number
11 or the number of billboards or the commercials that you see
12 on TV but based on real value provided to consumers. In
13 this case, we define value as cost and quality. It’s also
14 meant to use that competition, real competition, between
15 insurers and between health care providers to actually
16 increase value in health care. If we are relying on the
17 marketplace to lower health care costs, we need to actually
18 make sure the marketplace is fair and that it works because
19 I don’t think anyone believes that it works now.
20 Costs continue to go up disproportionate to the
21 rest of the economy. The Affordable Care Act put limits on
22 the ability of insurers to profit off of health care. They
23 must now provide either 80 or 85 percent of their insurance
24 premiums in actual health care services, depending on
25 whether it’s an individual or group insurance plan. We 19
1 have no similar checks and balances on providers, none
2 whatsoever. In fact, in recent years, health care
3 economists broadly agree that at least one of the big
4 drivers of our outsized cost is outsized provider leverage.
5 Big hospitals with a lot of cloud are demanding more money.
6 In recent years, while the number of people going to the
7 hospital went down, costs stayed high, almost entirely
8 because of high hospital prices. One study credited
9 increases in prices with 60 percent of health care spending
10 growth. We can't afford it anymore. Government and
11 business can't afford to spend such a large portion of
12 their revenue on health care.
13 I suspect that today we're going to hear a lot
14 about competition. Competition in some industries is easy
15 to understand. People sell pencils, shoes or iPhones. If
16 people think it's worth their money, they choose. If its'
17 too expensive, they go without. That's not the way health
18 care works. We know this intuitively. If someone is sick,
19 they need to go to the hospital. That's why the Federal
20 Government reaffirmed the law that says every citizen has a
21 right to emergency medical care. That's why as communities
22 we build our hospitals with our tax dollars, government
23 grants and insurance premiums, and that's why it seems
24 wrong that larger hospital systems demand more money from
25 patients simply because they can, and that's why it's 20
1 absolutely unconscionable that a health care system would
2 simply refuse to see some patients.
3 Insurance competition does matter. For years,
4 western Pennsylvania had limited options when it comes to
5 health insurance providers. Now we have many more. We
6 need to preserve that competition, and that's a primary
7 goal of this legislation because no insurance company
8 should be locked out of a marketplace because the provider
9 refuses to contract with them but health care competition
10 matters too, and it might matter even more. Remember,
11 providers are the ones dictating how much we pay for health
12 care, not insurers, and right now, hospitals charge vastly
13 different prices for the same procedures. One hospital may
14 charge $30,000 for a knee replacement, another may charge
15 $60,000 and another may charge $110,000, but those prices
16 have no relationship with quality. Paying more has nothing
17 to do with how well the procedure goes and how likely the
18 patient is to be able to walk afterwards. But those
19 patients who choose to go to the $30,000 provider don't
20 necessarily see any cheaper premiums or discounts than the
21 people going to the higher-cost provider.
22 One of the big goals of this legislation is to
23 make it possible for people to benefit by choosing a lower-
24 cost provider by giving insurance companies the tools that
25 can pass those savings along. Tiered networks charge lower 21
1 premiums, copays and coinsurance for visiting high-value
2 providers. Let me define something. You have heard about
3 limited networks. A limited network is a place where you
4 go which is just limited to the providers listed in a plan.
5 A tiered networks means you can go anywhere and you’ll get
6 rewarded for choosing a high-value provider at the end of
7 the day, so you get some skin in the game.
8 In the world we are entering, hospital systems
9 seem to believe that they benefit from affiliating with
10 insurance companies. They can try new ways of paying
11 doctors to help reward quality and value within their own
12 system, and that’s great, but it doesn’t help consumers or
13 independent doctors and hospitals if these systems close
14 themselves off to others and they never have to actually
15 compete based on the value they say they are creating.
16 I suspect that today w e ’ll hear some of the
17 health care innovations that we find in integrated delivery
18 networks like bundled payments and pay for performance, but
19 without a check and balance, without real provider
20 competition, those health systems can still set the price
21 of these innovative products wherever they’d like to. A
22 monopoly provider that sets its own price for traditional
23 fee-for-service payments can also set its price for bundled
24 payments or any other innovative mechanism because in that
25 world, anyone wanting access to one physician or hospital 22
1 with an entire hospital network has to buy into the entire
2 system. That means buying a health plan that the hospital
3 tells you to at the price they tell you to, and if you want
4 to go somewhere of higher value, you’ll get no benefit for
5 that because any insurance plan rewarding value won’t be
6 accepted, and that is simply unacceptable.
7 Insurance companies exist to help patients pay
8 for health care, pure and simple. Hospitals don’t exist to
9 help insurance companies. Our goal is a health care
10 marketplace that gives consumers as many options as
11 possible by empowering insurance companies to create
12 innovative products.
13 Finally, while this legislation is about health
14 systems, it is much broader than the local issue in western
15 Pennsylvania. The ramifications of the split between UPMC
16 and Highmark are serious. I ’ve spoken to human resource
17 directors at major companies who tell me that national
18 corporations are leery of headquartering in Pittsburgh
19 because one of our major health care providers is refusing
20 to accept national insurance accepted almost anywhere else
21 in the country.
22 I’m interested to hear today the testimony
23 related to how we create health care value in our
24 communities. I hope that as we listen to the various
25 perspectives and claims that we remember that this is not 23
1 about benefiting one industry or corporation. This is not
2 about helping Highmark, helping insurers or even helping
3 health care providers. This is about helping our patients
4 in our communities. Our goal is to make sure that all our
5 community residents can access health care that we need at
6 the most affordable price possible, and I would say w e ’ve
7 already gotten much input from people. Jim and I have been
8 around the State, certainly in western Pennsylvania,
9 talking to consumers, talking to insurers, and w e ’ve gotten
10 recommendations.
11 So we know that there are probably some
12 amendments that would make this legislation possible. We
13 hope that some of that comes from this Committee. So we
14 are open to that discussion to improve this bill but at the
15 end of the day, we are concerned about making sure that all
16 Pennsylvanians have access to high-value, low-cost health
17 care, and that’s our goal.
18 Thank you very much.
19 MAJORITY CHAIRMAN BAKER: Thank you very much,
20 Representative Frankel.
21 We are running slightly over. As I warned
22 everyone, w e ’re going to run a very tight ship with so many
23 testifiers. It’s my understanding, Representative Frankel
24 and Representative Christiana will be here all day, so we
25 will be having a break. Members will have an opportunity 24
1 to ask some questions. But if you are looking for a more
2 substantive answer in writing, please submit your questions
3 to our Executive Directors, Whitney Krosse and Abdoul.
4 Thank you, gentlemen. I appreciate your
5 testimony.
6 Next, we will have Charles Davidson from MCA
7 Administrators Incorporated. Welcome, sir.
8 MR. DAVIDSON: Thank you, Mr. Chairman. Thank
9 you, Members of the Committee.
10 I was speaking to Abdoul yesterday, and he
11 suggested that perhaps it would be appropriate if I gave
12 you a little bit of a background on who I am and the
13 marketplace in western Pennsylvania.
14 Back in 1989, I was a corporate lawyer practicing
15 for a large national law firm in Houston, Texas, and I
16 concluded that I hated lawyers and I didn't want to hate
17 myself, and I was trying to find something else to do with
18 my life, and I met a gentleman back here in Pittsburgh,
19 which is where I was raised, and went to CMU and to Pitt,
20 and he owned a company that was a third-party administrator
21 for health benefits, also known as a TPA. Now, for those
22 of you that don't know what a TPA is, a TPA administers
23 benefit plans for large companies that insure heath
24 benefits by self-insurance. You do all the functions of an
25 insurance company without an insurance company background. 25
1 So you process claims, you send out the cards, you answer
2 people’s questions.
3 Well, at that time, he said to me, if you want to
4 get out of the practice of law, there are these new things
5 called PPOs springing up around the country, and I don’t
6 know what they are but they are ways to get discounts and
7 to create networks, and you ought to look into that, and I
8 did look into it, and shockingly, our State here in
9 Pennsylvania had the most comprehensive PPO legislation in
10 the country. In fact, other than something called the
11 Knox-Keene statute in California, it was probably the only
12 thing that regulated PPOs.
13 So I ended up in my spare time forming a network
14 in western Pennsylvania and eastern Ohio, and within about
15 six months I had enough hospitals and doctors to create
16 this network. Well, that business ended up becoming a
17 national network, and I got to see all across the country
18 how hospitals and doctors would contract with people, and
19 in those days, it was a lot easier than it is today,
20 because frankly, you simply called them up and asked for a
21 discount and they would give it to you.
22 Along the way, a few years later, I ended up
23 acquiring the TPA that the gentleman had who led me into
24 this business. I also formed a pharmacy benefit management
25 company, a utilization management company, panels of 26
1 doctors and nurses who looked at claims, and in essence
2 became something of an expert in all fields that UPMC and
3 Highmark are in today.
4 What I can tell you is, the business grew rapidly
5 everywhere except my hometown of Pittsburgh except in
6 western Pennsylvania, and the reason for that was really
7 quite simple. Up until the mid-1990s, Highmark
8 essentially, and it was really its predecessor, Blue Cross,
9 was a very benevolent dictator in terms of dominating the
10 marketplace. It had better rates at all of the providers,
11 it had demanded contracts that make sure it kept the best
12 rates, and in turn, it didn't abuse that right and that
13 power; it worked with providers. But back in the mid-
14 1990s, there was a change that occurred, and that was
15 Highmark actually started to get into the managed care
16 business. They started acquiring physician practices.
17 They sort of put their toe in the water, and I think that
18 started -- and this is just my personal opinion -- I think
19 that started a cascading of hospital CEOs and CFOs looking
20 at Highmark a little bit differently than what happened
21 eventually. It culminated back in 2002 when they almost
22 did not re-sign a contract with UPMC, but ultimately they
23 got that deal done.
24 Now, in the mid-1990s, UPMC, to its credit, it
25 decided we're going to look around the country and we can 27
1 see what Kaiser's doing in California, we can see what
2 Geisinger’s doing in the eastern part of Pennsylvania, and
3 we ’re going to start our own health plan, and that’s
4 exactly what they did. But started in 2002, when they
5 signed their new contract with Highmark, they embarked on
6 what in hindsight was a fairly brilliant strategy to
7 assemble what is by far and away the most geographically
8 spread and powerful network in western Pennsylvania. They
9 now have control of the marketplace as a provider, and what
10 does that mean? Well, what it means is that Highmark
11 wasn’t doing anything wrong when it started to dabble in
12 managed care. It was doing what the national trends say.
13 And UPMC wasn’t doing anything wrong when it started to
14 assemble a gigantic network and build a hospital plan.
15 They were truly bringing what was going on in other parts
16 of the country to western Pennsylvania, and it should have
17 fostered competition. However, UPMC assembled this
18 geographical juggernaut and it actually got a bigger part
19 of the market share than I think anybody could have ever
20 imagined back in 2002, and so what does that mean? Well,
21 if you look at health care purchasing, there’re three
22 things that drive health care purchasing: geography,
23 quality and pricing, and that’s it in a nutshell. Most
24 carriers offer similar types of plans.
25 But the truth is, for those of you from western 28
1 Pennsylvania, if you live in Uniontown, you’re not going to
2 drive to Johnstown to get your health care. You want to go
3 locally. In terms of quality, you want to go to the best
4 doctors. But if there’s a good doctor nearby and you don’t
5 have something serious, you’re probably going to go to
6 them, and that’s the geographic aspect. And then the third
7 aspect, which historically has been just completely absent
8 from the discussion in western Pennsylvania is pricing, and
9 that’s because there has quite simply been a lack of
10 transparency in what things cost.
11 Well, I can’t say for certain that this
12 legislation was directly caused by Highmark’s potential
13 lack of access, but the truth is, Highmark is facing a
14 crisis right now, and that crisis is one of geography,
15 quality and pricing. Geographically, if they split from
16 UPMC and UPMC no longer accepts them, the reality is,
17 they’re not going to have providers in every party of the
18 area that they need. There are going to be citizens of
19 this Commonwealth who are going to be separated from their
20 doctors and from their hospitals. In terms of quality,
21 UPMC rightly or wrongly is perceived as being the best
22 hospital system, and I think that Highmark is to be
23 commended for the money and time and effort it’s put into
24 the West Penn Allegheny system but they have a long road to
25 go to catch up in terms of reputation, and then in terms of 29
1 pricing, there’s an issue with pricing which actually would
2 be in Highmark’s favor.
3 So what does that mean? Well, what it means is,
4 today we have a system in western Pennsylvania that is
5 about to become very unbalanced. If Highmark is cut out of
6 the UPMC network, yet it currently has roughly 60 percent
7 of the marketplace, what’s that going to mean? Well, if
8 you look around the country -- and I ’m leaving here today
9 to go to San Diego, where I have a fair amount of business
10 -- you don’t have to look any further than San Diego to see
11 what it’s going to mean. In San Diego, you have Kaiser,
12 and they operate their hospitals, and then you have the
13 Scripps system and a few ancillary hospitals, and they
14 operate their system. Most national players contract with
15 Scripps, and Kaiser offers only its own benefit plan.
16 Essentially, that’s what you’re looking at a model that’s
17 going to develop here in Pennsylvania, and the question I
18 think for you as legislators to decide is, is that really a
19 good model and is that the best thing that we can do for
20 the citizens of Pennsylvania.
21 I’d like to address for a moment this bill and
22 what it does and what it doesn’t do. First of all, it
23 requires hospitals in an integrated delivery system to
24 contract with any carrier. The first thing I ’d urge this
25 Committee to do is to take a step back and realize that’s 30
1 the wrong word. It should not be any carrier; it should be
2 any payer. Twenty percent of all the benefits plans in
3 this country are administered either by third-party
4 administrators, Taft-Hartley plans, which are run by
5 unions, and in some cases very large employers like Walmart
6 administer their own benefit plans. The way this bill is
7 written, it doesn’t protect them.
8 More importantly, this bill doesn’t protect the
9 most innocent of payers in this country, and that’s
10 uninsured individuals. Now, a lot of people will say well,
11 there won’t be any uninsured individuals left soon because
12 the Affordable Care Act is going to make everybody buy
13 insurance, and if you believe that, I ’ll say you the
14 Liberty Bridge. It’s not true. There’s going to be a
15 large number of uninsured people left, maybe even more
16 uninsured people left, as a result of the Affordable Care
17 Act, and the way this bill is written, what’s going to
18 happen? They get no protection when they go to the
19 hospital.
20 To give you an idea of what I ’m talking about, if
21 you look at the price differences between what people pay
22 at most facilities in Pennsylvania, they are staggering.
23 Large carriers might get a 20 or 30 percent discount today.
24 TPAs might get a 10 or 15 percent discount, same as Taft-
25 Hartley plans. But a person who is uninsured working two 31
1 jobs and they don't have benefits at work, they get no
2 discount whatsoever. That person, if they go into the
3 hospital and have a catastrophic claim, it is true that the
4 hospital may in its own benevolence say okay, you've got a
5 $90,000 bill, you can pay at $100 a month for the next 20
6 years, but the reality is, they don't get the benefit of
7 the same discounts that a Highmark or a Blue Cross or a
8 UPMC or Aetna, Cigna and United.
9 This bill prohibits hospital profits to subsidize
10 the insurance business. That's a good aspect of the bill,
11 and that should be kept. But the reality is, that isn't
12 the only thing you should be looking at because there are
13 hospitals that are not part of integrated delivery systems
14 that could also play favorites. You should be looking at
15 all providers, not just those in integrated delivery
16 systems.
17 So what really is wrong with House Bill 1621 and
18 1622? First of all, it perpetuates the discrimination by
19 failing to protect individuals without insurance, Taft-
20 Hartley plans, self-insured employers who don't use
21 carriers to administer benefits. It only applies to
22 integrated delivery systems, and the real question you
23 should ask yourselves is, why should any hospital or doctor
24 be charging different prices to different people? And
25 that's really what goes on today. 32
1 The last thing I would say is, with respect to
2 what’s wrong with the bill is the notion of mandatory
3 arbitration. That’s going to be a long, expensive process,
4 and while I still have sympathy for my brethren at the bar
5 who still must practice law, I will say to you, it’s simply
6 going to be a boon to the lawyers and it really isn’t the
7 right answer.
8 So what is the biggest problem with House Bill
9 1621 if in fact you believe in the premise that this was
10 designed to help Highmark get access to UPMC? The answer
11 is that it doesn’t really achieve that goal, not with
12 certainty, and I ’ll tell you the reason why. All you have
13 to do is look in the last 12 months when Aetna acquired
14 Coventry for $8.1 billion. Now, if this bill passes as
15 it’s written, and UPMC decides well, we don’t like this
16 bill, and you know, we really don’t want to be in the
17 insurance business, let’s see what our little health plan
18 is worth, they have, according to their website, 2.2
19 million members. That compares to Coventry, which had 3.5
20 million members. Now, I don’t know if their health plan is
21 worth $4 billion or $5 billion. I suspect that there was a
22 mix in Coventry that maybe made that a little bit more
23 valuable, but the truth is, they certainly could get $2
24 billion to $3 billion in the open market for it, and if I
25 were Jeffrey Romoff, if this bill would pass, I would have 33
1 to think long and hard about whether or not I would sell
2 the health plan, and I'm sure UPMC will get up here today
3 and say to you, oh, we're not for sale, but the truth is,
4 if they did sell the health plan just hypothetically, this
5 bill wouldn't even apply to them and they could still cut
6 Highmark out of their network. The truth is, you need to
7 be regulating what providers charge to people, not just
8 integrated delivery systems.
9 Now, if you look around the country, there are
10 lots of different ways that that happens. Probably the
11 most outrageous happens in the State just south to us, and
12 that's Maryland, where they actually regulate what
13 providers can charge, and even though that is a very
14 conservative fiscal person I happen to think that's
15 tantamount to communist practices, the reality is, we do
16 need some kind of regulation.
17 So what kind of regulation could you enact?
18 Well, I would submit to you that a free-market practice
19 that you could do that's actually going to be far simpler
20 than this current bill would be to simply say as a
21 condition of your license, physicians and hospitals, you
22 need to be transparent in what you charge and you need to
23 charge everybody the same price. If you believe that
24 health care is a right to every one of the citizens in this
25 State, why on earth should anyone be allowed to be 34
1 discriminated against in terms of pricing? And some may
2 argue, well, what about tiered networks, what if you’re cut
3 out of a network, what if there’s incentives to move away,
4 okay, you can charge a tiered network a 10 percent
5 surcharge so there is a little bit of a higher price. But
6 who do you end up hurting if you do that? In the end, I
7 would argue to providers, it’s probably yourself.
8 Lastly, to come back to the theme that I echoed
9 upon earlier as I had discussed with Representative
10 Frankel, most important of all, the people that you should
11 be looking to protect are the most vulnerable people in our
12 Commonwealth, and those are the people that do not have
13 insurance. Right now, they have no one looking out for
14 them when they go into a provider or when they go into a
15 hospital. They should not be charged more money than
16 anybody else, and yet that’s exactly the situation that we
17 have today. If you enact a law that says you charge
18 everybody the same price, that not only levels the playing
19 field, and as Representative Christiana said, the goal is
20 for a fair quality health system with equal access, that’s
21 exactly what a law like that would achieve.
22 I commend you for the work that you’re doing, and
23 I ’m open to any questions.
24 MAJORITY CHAIRMAN BAKER: Thank you very much,
25 Mr. Davidson. 35
1 We do have time for one or two questions only.
2 Members?
3 Representative DeLissio.
4 REPRESENTATIVE DELISSIO: Thank you, Mr.
5 Chairman.
6 Mr. Davidson, your thought about both
7 transparency and pricing being, you know, an apple is 10
8 cents here and it’s 10 cents...
9 MR. DAVIDSON: I ’m sorry. Say that again.
10 REPRESENTATIVE DELISSIO: You know, the cost of a
11 service is the same and is regulated. How would you
12 envision that coming about? Would that be by legislating
13 for a board to set those types of rates, or do you have any
14 further thoughts?
15 MR. DAVIDSON: My apologies. I wasn’t clear in
16 what I said. I happen to think that what they did in
17 Maryland while well-intentioned really just goes too far.
18 I don’t think you should be setting prices. I am a free-
19 market person. I think that you should allow providers to
20 charge whatever they want but whatever they decide to
21 charge, they have to charge everybody the same price. The
22 insanity of today’s system, if I happen to somehow write a
23 client in western Pennsylvania now, I can’t go to UPMC and
24 get the same discount as they give their own health plan or
25 they give Aetna, United and Cigna. I actually have to go 36
1 to Aetna, United and Cigna and buy access to their
2 discount. That’s crazy and that’s stupid. And worst of
3 all, if some poor soul who lives in Squirrel Hill who works
4 two part-time jobs and doesn’t have health insurance, he
5 goes into the hospital and he’ll pay 30 percent more than
6 anybody else; at least he’ll be billed 30 percent more than
7 anybody else, and that’s unconscionable, and you have the
8 power with very simple legislation to fix that. Charge
9 everybody the same price, and you will see competition like
10 you’ve never seen, you’ll make payers compete on the
11 quality of their administrative service on how well they
12 treat their plan members, and all of a sudden you’ll see
13 real competition, not by artificially cutting people out.
14 REPRESENTATIVE DELISSIO: Thank you, Mr.
15 Chairman. Thank you, Mr. Davidson.
16 MAJORITY CHAIRMAN BAKER: Mr. Davidson, how or
17 who would determine that price?
18 MR. DAVIDSON: I would say it should be the
19 providers themselves. If Highmark and West Penn Allegheny
20 are successful, for example, in building the most efficient
21 health care system that’s ever been built in the country
22 and they can have a price far less expensive than UPMC,
23 then UPMC will be forced to try and find a way to be more
24 efficient to be competitive with them. That’s what
25 competition is all about. We shouldn’t be telling 37
1 providers as a business, even though they're charities,
2 even though they're nonprofits, we shouldn't be telling
3 them what to charge because only they know what their real
4 costs are. They should be looking at their costs and then
5 finding the best way to provide those services to people at
6 the lowest cost possible. It may mean that they won't have
7 boxes down at the Steeler games anymore, heaven forbid.
8 MAJORITY CHAIRMAN BAKER: We have time for one
9 quick question. Representative Day?
10 REPRESENTATIVE DAY: Thank you. Thank you for
11 your testimony today.
12 Traditionally, insurance companies and health
13 care providers played a balancing role. Health care
14 providers would say this is what we need to charge for new
15 and innovative procedures to keep our health care rising as
16 far as quality. Insurance companies manage that over a
17 pool of a population. I heard you say that transparency of
18 health care provider pricing is where you think the sweet
19 spot it. I'm curious, do you think regulations should
20 maybe not with this bill but in the future, a longer-term
21 solution, prohibit insurance companies and providers from
22 getting into each other's business?
23 MR. DAVIDSON: Absolutely not. I think that if
24 you really understand what an insurance company is, it's
25 really nothing more than the financing arm of a health care 38
1 provider. That’s number one. Number two, if you look at
2 the most efficient way to do it and probably the most
3 efficient model in the country would be Kaiser, it can be
4 done with ruthless efficiency that provides high-quality
5 care.
6 One of the interesting things is, you use the
7 word "insurance" and you think of it as a carrier but a
8 very substantial portion, for example, of Highmark’s
9 business really isn’t insurance. It’s what’s known as ASO
10 business, administrative-services-only business, and it’s
11 not even really an insurance policy because the employer is
12 simply using their own funds to pay the claims and Highmark
13 draws those funds from the employer as they’re needed to be
14 used. So the reality is, mixing these two I don’t think is
15 a bad thing, because at the end of the day, all w e ’re
16 talking about is a business is finding a way to finance
17 itself, if that makes sense.
18 REPRESENTATIVE DAY: Thank you, Mr. Chairman.
19 MAJORITY CHAIRMAN BAKER: Last quick question.
20 Do you believe the Pennsylvania Health Care Cost
21 Containment Counsel provides adequate transparency?
22 MR. DAVIDSON: No.
23 MAJORITY CHAIRMAN BAKER: Thank you very much for
24 your testimony, Mr. Davidson.
25 Our next testifier, we welcome Frank Trembulak, 39
1 Executive Vice President, Chief Operating Officer for
2 Geisinger Health System. Welcome, Frank.
3 MR. TREMBULAK: Good morning. My name is Frank
4 Trembulak, as introduced. I ’m the Executive Vice President
5 and Chief Operating Officer for the Geisinger Health
6 System. I thank the Health Committee and Chairman Baker
7 and Chairman Fabrizio for the opportunity to comment on the
8 proposed Christiana and Frankel legislation, House Bill
9 1621 and 1622, overall concept being any willing payer.
10 My comments really -- and I have submitted
11 written testimony. I ’m not going to dwell on that. I ’m
12 going to highlight some of the points that were made in
13 that testimony hopefully in very short order, so if you
14 have questions, I can try to respond to those questions,
15 and I think our view, while having an opinion on the
16 legislation, which I ’ll express, I think is more forward-
17 looking around some of the aspects of where we need to go
18 with health reform in the Commonwealth, and that’s one of
19 the biggest concerns. While we view the bills anti
20 competitive, w e ’re also very concerned about the chilling
21 effect on health reform and what we need to do in the
22 Commonwealth.
23 So therefore, we strongly oppose any-willing-
24 payer legislation or any one-off legislation that’s dealing
25 with concerns as they arise as health reform is playing out 40
1 because we think we need a more comprehensive approach.
2 The Members may know that Geisinger is the
3 Commonwealth's oldest vertically integrated delivery
4 system, having founded our health plan in 1972. Our
5 history has been that we've worked constructive with all
6 levels of government -- Federal, State, local levels -- on
7 health matters. The proposed legislation will have a
8 direct effect on Geisinger and the innovative work we've
9 been doing to try to reform health care and become a model
10 on a national basis for health reform.
11 Our concerns, of course, as I already stated, are
12 the obvious: the anti-competitive nature forcing business
13 relationships with unintended consequences, some of which
14 the last witness spoke to, but more importantly, the aspect
15 or countervailing effect that it will have on health
16 reform.
17 One thing about health care, though, I think we
18 can all agree upon is that health care delivery, the way
19 it's structured, the way it's paid historically and today,
20 for the most part, is not sustainable. Health care cost is
21 a significant economic strain on the national and
22 Commonwealth budgets, and that was already addressed.
23 Dramatic reform of health care structure, delivery and,
24 importantly, payment methodology is desperately needed.
25 For more than 10 years, Geisinger has been making 41
1 innovations and redesigning care delivery and payment
2 methodologies. We have successfully attacked the 35
3 percent of care that is provided nationally to patients
4 that adds no value to the outcomes of their care. We have
5 proven that we can improve health delivery and patient
6 outcomes while dramatically bending the cost curve, the
7 cost curve that has to be bent in order to sustain health
8 care.
9 Our results have been published, and w e ’ve been
10 recognized nationally by President Obama, President
11 Clinton, CMS and others as they look to Geisinger
12 innovation as a model of care delivery for the future, and
13 w e ’re very proud of that. On the other hand, while we
14 still have one foot in the future, we have one foot in the
15 present, so part of our business is still related to the
16 old methodology of how we contract. These bills would
17 force us to move further back into the present versus going
18 forward into the future.
19 Health reform -- and when I speak of health
20 reform, I’m really categorizing health care delivery
21 outcomes and payments, and some degree, structure. In my
22 testimony, I talk about continuums of care. Health care is
23 consolidating into continuums of care incorporating payers
24 to be efficient in their process, and I would agree with
25 the last witness. Again, insurers are really the financing 42
1 arm of that. Geisinger internalized that financing arm for
2 a component of our business. Still, the majority of our
3 patients are insured by other payers; they’re not insured
4 by Geisinger Health Plan.
5 So anyway, health care reform, delivery, outcomes
6 and payment is and will be hard work. The dramatic reform
7 that is needed will in many communities create dramatic
8 service and economic dislocation and realignments, and
9 that’s one of the reasons w e ’re here today. Geisinger has
10 seen this reform play out in our north central and
11 northeastern marketplace will less fanfare than we have in
12 the urban market in Pittsburgh. There’s been tremendous
13 consolidations in north central/northeastern Pennsylvania.
14 There are few, if any, remaining freestanding community
15 hospitals who found it impossible to survive the economy
16 and the economics of payment reform and the requirements of
17 payment reform and aligned either with Geisinger or
18 community health services. Some have closed, but there’s
19 been a consolidation.
20 It is imperative that the legislature and the
21 administration take leadership by preparing the
22 Commonwealth for the health reform sea change which is
23 really upon us and its effects by creating a comprehensive
24 legislative and regulatory framework to constructively
25 guide reform and oversee health care delivery into the 43
1 future.
2 We believe that the recently applied for CMMI
3 State innovation model redesign can provide a forum for the
4 creation of a collaborative activity to debate and create
5 such a framework. In the interim, one-off legislation such
6 as the proposed bills should be avoided, or if ultimately
7 deemed necessary, should be structured in a very narrowed
8 way to try to prevent unintended consequences and viewed as
9 transitionary, that once a broader framework is put into
10 place, that these interim bills could be repealed so there
11 is that opportunity to mitigate some of the sensitivities
12 as we work and look forward into how health reform should
13 be carried out within the Commonwealth.
14 Geisinger looks forward to participating in such
15 a collaborative debate for defining the new health care
16 paradigm for the citizens of the Commonwealth, and that
17 would conclude my verbal remarks.
18 MAJORITY CHAIRMAN BAKER: Thank you very much,
19 Frank, for your testimony, and the much more extensive
20 written testimony that you’ve proffered. We do have time
21 for Member questions.
22 Yes, Representative Benninghoff.
23 REPRESENTATIVE BENNINGHOFF: Because w e ’re early
24 on in testimony, I think it would be interesting -- first
25 of all, thank for your testimony as well. I know you guys 44
1 are great providers in some of our area. We've been
2 impressed with your electronic medical records system, and
3 I think that's really been very innovative and a good model
4 not only for our own area but for the Commonwealth and
5 probably the country as a whole.
6 With that in mind, I think it would be good for
7 the members if you could give us kind of a definition or
8 explanation of the merits, as we throw this terminology
9 around, of IDNs, or integrated delivery systems, because
10 it's going to be, I think, beneficial for the rest of
11 today's dialog of why do we have those, what's the merits
12 of those and what's the importance of that.
13 MR. TREMBULAK: Okay. Thank you.
14 Fundamentally, as I think was alluded to in the
15 earlier testimony, health care reform has really been a
16 disaggregated or a cottage industry. We have different
17 professionals providing physician care, hospital care, home
18 health care, all working independently of each other. Over
19 the years, they've come closer and closer together. Under
20 health reform, they're being pushed together and
21 consolidating, aggregating into systems. Actually in the
22 Affordable Care Act, there's a model called accountable
23 care organizations that provide the opportunity to create
24 continuums of care via contract. Well, those continuums of
25 care are also integrated delivery systems where within a 45
1 singular umbrella there is a continual spectrum of care
2 that’s provided from primary care, home care, hospital
3 care, tertiary to post-acute care. The seamlessness that’s
4 necessary to provide that care is really very important to
5 the efficiency.
6 The other aspect of that, of course, the Federal
7 Government’s promoting this too, conserve costs, reduce
8 costs and they’re offering an incentive payment that if
9 they reduce cost, the ACO can share in that. Well,
10 integrated delivery systems, Geisinger is doing the same
11 thing as some of the model redesign, payment redesign as
12 w e ’ve done and w e ’ve published. W e ’ve been bending the
13 cost curve anywhere from 7 to 10 percent, which is fairly
14 dramatic, where the government has a goal of 1 percent over
15 10 years.
16 So I think that is key, and of course, you
17 reference the electronic health record. The ability to
18 have a common electronic health record across that
19 continuum of care or even the patients at home can access
20 their record. It’s very important to that seamlessness of
21 flow.
22 So again, I think the IDN is another way I would
23 characterize in today’s world as a continuum of care under
24 a singular umbrella. Accountable care organization is
25 really by contract that I think inevitably will flip to 46
1 become IDNs because once they wring out all the cost, not
2 every service in the continuum of care is economically
3 sustainable on its own, so they’re going to have to
4 aggregate into, I think, singular organizations.
5 REPRESENTATIVE BENNINGHOFF: Thank you, sir.
6 Thank you, Mr. Chairman.
7 MAJORITY CHAIRMAN BAKER: Representative
8 DeLissio.
9 REPRESENTATIVE DELISSIO: Thank you.
10 Thank you for your testimony. Does Geisinger
11 currently have an agreement with Highmark?
12 MR. TREMBULAK: Yes, we do.
13 REPRESENTATIVE DELISSIO: Does that agreement
14 include any plans that are tiered?
15 MR. TREMBULAK: I ’m not sure if...
16 REPRESENTATIVE DELISSIO: I may be asking this
17 question awkwardly.
18 MR. TREMBULAK: Yes, I ’m not sure if we
19 participate in that. Highmark did come out with a new
20 product, a tiered program, and I ’ll say Geisinger hospitals
21 were tiered low in the plan. We were not in the top tier.
22 Our biggest concern when that was rolled out, it was viewed
23 and promoted as quality, so they’re saying that if you want
24 quality, you have to go to the top-tier hospitals, which we
25 strongly argued against. That really wasn’t a quality 47
1 issue, it was really based on cost. The cheaper hospitals,
2 lower-cost hospitals were tiered higher.
3 REPRESENTATIVE DELISSIO: The lower-cost
4 hospitals were tiered higher so it's almost
5 counterintuitive.
6 MR. TREMBULAK: They were promoted as cheaper for
7 patients to go to, a cheaper product.
8 REPRESENTATIVE DELISSIO: And one of my concerns
9 here, and I can speak only for myself, obviously, is that
10 in all of this, in learning all of this, I have
11 constituents who are consumers who have varying degrees of
12 grasp on this topic and issue, and quite frankly, when
13 we're well, we don't think a lot about it. When we're not
14 feeling too well, we just need help and service. So this
15 concept of tiering and where these plans are and the
16 ramifications of that tiering on consumers' pockets could
17 be a concern.
18 So I think this hearing is very helpful. It's
19 helpful to understand where a network such as yours that's
20 been established for a while stands in this mix and what
21 some of your vision is going forward. So I appreciate your
22 answers. Thank you.
23 MR. TREMBULAK: I think our approach would be is,
24 how do we simplify the aspect of insurance products and
25 really come up with in essence a commonality of only one or 48
1 two major products over time.
2 MAJORITY CHAIRMAN BAKER: Mr. Trembulak, what’s
3 your opinion relative to previous testimony about price
4 transparency, charging one price across all payers?
5 MR. TREMBULAK: I think, ideally, that makes a
6 lot of sense. As a matter of fact, as you may know,
7 pricing in health care is really not relevant to the
8 majority of the patients and has no bearing on the cost of
9 providing a service. Prices are kind of an artifact that
10 have evolved out of cost reimbursement and how to best
11 create an approach for the formulistic cost reports of the
12 past, and things have really never changed. They just
13 continue to be inflated. So prices have no bearing or
14 relevance. That’s where there’s such disparity in pricing
15 from market to market, or even hospitals across town.
16 So I think the issue, if we could bring
17 everything down to everyone paying charges, charges could
18 be reduced dramatically to some common level, and I think a
19 provider could charge every patient the same for every
20 service. It gets back to this comment earlier where you
21 could simplify the whole insurance scheme by doing
22 something like this. It’s very radical, very dramatic, but
23 those kinds of issues are things that I think need to be
24 debated and dialoged as to does that type of change warrant
25 the significance that would be involved. 49
1 MAJORITY CHAIRMAN BAKER: Thank you very much.
2 Representative Christiana.
3 REPRESENTATIVE CHRISTIANA: Thank you, Mr.
4 Chairman, and Mr. Trembulak, I thank you very much for
5 coming here and for your testimony.
6 I think one of the previous questions asked if
7 you had a contract with Highmark, and you answered you did.
8 Do you also have contracts with the commercial insurers
9 like Aetna, United, Cigna?
10 MR. TREMBULAK: Yes, all major payers.
11 REPRESENTATIVE CHRISTIANA: So if you could
12 quantify the percentage of insured individuals in your
13 area, could you try to quantify what percentage of them
14 have access to your facilities?
15 MR. TREMBULAK: Well, I ’d say of the patients
16 that we see in our organization, 30 percent of those are
17 probably insured by our own health plan. The other 70
18 percent are insured by other insurers. Now, there are some
19 self-pay but it’s very small these days, and then there’s
20 charity care. So approximately 70 percent are other
21 insurers.
22 REPRESENTATIVE CHRISTIANA: What I ’m saying is,
23 there’s rarely the case do you have someone that has
24 insurance that is locked out from being in network, right?
25 So my question is, while you say this will have a chilling 50
1 effect and could hinder Geisinger, my question is, if you
2 already have contracts with all of them, your service
3 territory has complete access to your facilities, can you
4 justify to me how in the world this bill would affect you
5 at all?
6 MR. TREMBULAK: Because what w e ’re trying to do
7 is to change the methodology and approach to contracting,
8 so rather than contracting for units of service, which is
9 what most of those contracts are -- the more work we do,
10 the more we get paid -- and then we argue every year what’s
11 the level of payment for each level of service we provide.
12 It’s really counterproductive.
13 This would carry out or perpetuate that
14 historical approach. What w e ’d like to do is to change the
15 whole approach to contracting, really going into more
16 bundled payments and payment for outcomes of work that add
17 value, and that was referenced in earlier testimony.
18 So how do we really focus contracting around the
19 value of health care versus just paying for services of
20 work? W e ’re one of the few businesses if we screw up and
21 we do rework, we get paid again. That shouldn’t occur. If
22 there’s an unfortunate error or problem, we should fix that
23 at no cost, and that whole approach to changing how
24 contracting is done between providers and payers is really
25 key, and part of the continuums I referenced, again, it’s 51
1 very important for payers to integrate with providers,
2 whether they’re, I ’ll say, owned by the same umbrella or
3 separate. They need to work together to really change
4 methodology.
5 REPRESENTATIVE CHRISTIANA: One final question.
6 Your insurance clients have in-network access to your
7 competitors, so Geisinger Health Care Plan contracts with
8 your competitors in this region. I ’m from western PA, so I
9 don’t necessarily know who your competitors are.
10 MR. TREMBULAK: Well, in our market, we have few
11 competitors, but CHS, Community Health Services, has
12 acquired many of the hospitals. We contract with CHS.
13 REPRESENTATIVE CHRISTIANA: I think it’s
14 important to note for the Members that while we maybe
15 disagree on how to get to a model similar to yours, I ’ve
16 got to commend you for contracting with your competitors as
17 well as contracting with all the national insurers and
18 competition. If there’s a way to strengthen the bill to
19 make it better, I think Representative Frankel and I have
20 been very clear on that, but I have to commend you on your
21 approach and your fairness to your constituents. Thank
22 you.
23 MR. TREMBULAK: Thank you.
24 MAJORITY CHAIRMAN BAKER: Representative Frankel.
25 REPRESENTATIVE FRANKEL: Thank you, Mr. Chairman, 52
1 and thank you, Mr. Trembulak, for your testimony.
2 In your response to Representative DeLissio, you
3 talked about the tiered network question and the value of
4 it that implied that steering patients to cheaper providers
5 would relate to poor quality. But when I take a look at
6 the national discussion statistics, price has very little
7 bearing with respect to value and quality. I mean, when we
8 look at western Pennsylvania -- now, I know Mr. Davidson
9 expressed some skepticism with respect to the PHC4, and I
10 would agree that it needs to be enhanced. We need a good
11 transparency agency, and while it may have been state-of-
12 the-art when it was formed, it's now gray and needs to be
13 updated and broadened.
14 But they do have qualitative measures based on
15 readmission rates and length of hospital stays, and when we
16 take a look at western Pennsylvania, for instance, the
17 consistently least expensive hospital, Jefferson Regional
18 Hospital, is consistently either as good as outperforms the
19 most expensive hospitals in our region almost in every
20 single category in PHC4. So just that and based on what I
21 read about from others that price has almost no bearing,
22 that that $110,000 knee replacement versus a $30,000 knee
23 replacement has very little bearing on the outcome when you
24 pay the extra dollars. So I would like you to address that
25 as well. 53
1 The other thing that your testimony talks about
2 is that you can’t offer the same innovative payment
3 structures to external payers, which I don’t quite
4 understand why you can’t do things like bundled payments
5 and so forth with external payers as well. Because as I
6 said, all these innovative products can be priced any way
7 you want unless you have competition that has the same
8 bundled product that might be less via check and balance
9 with respect to your innovative product, and you do.
10 Geisinger does do great work with respect to innovation but
11 I’m not particularly comfortable with the idea of your
12 providing the innovative product without any alternative
13 out there because, quite frankly, when I take a look at the
14 way health care is priced, there is enormous manipulation
15 in the reimbursement system to aggressively enhance
16 revenues, and we need provider competition at the end of
17 the day. So those are a couple of things that I ’d like to
18 ask.
19 And finally, quickly, do you charge your own
20 affiliated health plan less for services than others?
21 MR. TREMBULAK: No, it’s the same price, and we
22 negotiate that, and I ’ll get back to that as it relates to
23 the innovation. So as an example, some of the innovation
24 we did eight, ten years ago when we first started on this
25 journey was, we branded this proven care, and we got a lot 54
1 of national notoriety for that, and it was bundled pricing
2 for open heart surgery, and the only payer that would
3 consider paying a bundled price for that was our own health
4 plan. So we've not been able to engage other payers to
5 make a current run at this, but historically as we've
6 approached payers about changing how we contract for those
7 services. On the other side as we change the approach to
8 delivering care, we provide the care the same way to all
9 patients regardless of who the payer is. So indirectly the
10 payer's getting a benefit for the approach to care; they're
11 just not paying us under a new methodology. So if you
12 follow that process and that plan. So we've offered that
13 innovation and we deliver it on service. We've offered to
14 get paid and we've not been able to get there with other
15 payers.
16 On the price and the outcome, that's true. Price
17 and the particular outcome may not have a direct effect.
18 In most cases it doesn't have a direct effect. Again, it's
19 not necessarily price, it's the contract payment rate that
20 really is the difference. What you get into is the scale
21 of resources that go into services or in large tertiary or
22 teaching hospitals, you have other costs that have to go
23 into the price to cover these other things that are
24 overhead for teaching or research, and there's some logic
25 and rationale for that. The question is, what's that 55
1 differential and what should it be.
2 Some of the community hospitals I referred to,
3 though, were not even comparable to the ones that you
4 referenced, so you’re right, there are abilities to look at
5 publicly available data to assess the quality but it really
6 is different hospital to hospital, and we need to be more
7 aware of those differences.
8 REPRESENTATIVE FRANKEL: I know the issue with
9 tertiary hospitals, and I agree with you, tertiary
10 specialty hospitals should be entitled to higher
11 reimbursement, but there needs to be some rationale to it.
12 In some cases we see in western Pennsylvania two to three
13 times price differential over a general hospital when you
14 move it to a tertiary hospital. W e ’ve seen a movement of
15 other procedures to tertiary hospitals. For instance, our
16 Magee-Womens Hospital, a great women’s hospital, now does
17 bariatric surgery, orthopedic surgery, pathology for UPMC
18 is done there, and it seems to me have been a strategy to
19 enhance revenues without really adding value at the end of
20 the day.
21 So while I agree tertiary hospitals and teaching
22 hospitals are entitled to higher reimbursement rates, there
23 has to be some rationale to it, and it’s being used as a
24 tool, I think, to kind of find a way to enhance revenues in
25 someplace -- I don’t know if this happens in your health 56
1 care system or not -- a way to basically artificially
2 inflate the costs of health care by really manipulating the
3 reimbursement rate and taking advantage of tertiary
4 hospitals in particular.
5 MR. TREMBULAK: Yes, I think it goes back to my
6 comment before that, again, price, in most cases -- I can’t
7 speak specifically -- but in most cases has no bearing or
8 has no basis in cost. So it really is determining what is
9 cost. If everybody paid price, we could reduce prices
10 dramatically to pay a reasonable price over cost. Because
11 you still need a margin for reinvestment.
12 REPRESENTATIVE FRANKEL: Thank you very much.
13 Thank you, Mr. Chairman.
14 MAJORITY CHAIRMAN BAKER: Thank you, Frank, for
15 your testimony, very, very interesting testimony, very
16 insightful. More Members have questions but w e ’re out of
17 time for this time frame.
18 I do want to commend Geisinger. It’s my
19 understanding you have the largest rural health care
20 delivery system, not only in Pennsylvania but possibly in
21 the country, and bending the cost curve by double digits,
22 it’s quite commendable and admirable, so keep up the good
23 work.
24 MR. TREMBULAK: Thank you. Thank you, Mr.
25 Chairman. 57
1 MAJORITY CHAIRMAN BAKER: Next testifier is Sam
2 Marshall, Insurance Federation of Pennsylvania. Welcome,
3 Sam.
4 I would like to acknowledge the presence of the
5 Majority Leader, who’s joined us, Mike Turzai.
6 Sam, you may proceed when you’re ready.
7 MR. MARSHALL: Thank you. Sam Marshall with the
8 Insurance Federation. W e ’ll just go to page 2 on my
9 remarks and delve right into the bills and the problems we
10 see with them.
11 We hear the demands from consumers that UPMC and
12 Highmark remain in contract. That’s understandable. Those
13 are the dominant providers of health care and health
14 insurance in western Pennsylvania, and they seem
15 inseparable. Change in health care and health insurance is
16 inherently unsettling. It’s the most intimate, crucial and
17 universal service need out there.
18 These bills answer that immediate demand by
19 ostensibly assuring that consumers can continue their
20 Highmark coverage with access to an in-network UPMC. They
21 require that UPMC contract with Highmark if Highmark wants
22 to, as it does for now. Presto, consumer demand is met,
23 fear is taken care of and problem solved. If only the
24 regulation of health care and health insurance were that
25 simple. 58
1 These bills require mandatory arbitration between
2 two direct competitors under rules that favor only one and
3 will ensure that the largest insurer in Pennsylvania
4 remains just that. They raise needless challenges and
5 questions for government in regulating contracts between
6 providers and insurers. They foreclose the emergence of
7 competition to Highmark on the insurance side and the
8 salvation of competition to UPMC on the hospital side.
9 Whatever immediate balm they provide, it isn’t worth it.
10 Now, I ’ll go into the bills and some of the
11 specific areas. And first, they require a hospital that’s
12 part of an integrated delivery system contract with any
13 willing insurer and abide by a number of other restrictions
14 in its insurance contracting practices. It sounds pretty
15 good for the insurer, and it is, but as the bill defines
16 "insurer," it leaves out commercial and group health
17 insurers so only the Blues and the HMOs get this help. I
18 noted in the draft, that gap potentially continues into the
19 definition of an integrated delivery system itself. I
20 don’t think that’s the intent, but that could mean that the
21 bills right now don’t include or could easily -- all
22 Geisinger or UPMC has to do is drop it to its HMO and then
23 the bills don’t include them as integrated delivery
24 systems. I think that’s a drafting question. I know w e ’ve
25 raised it, but that’s something that has to be addressed, 59
1 the definition of health care carrier.
2 Inexplicably, the bills don't apply to all
3 hospitals in setting parameters over their contracting
4 prices, just the ones that are part of an IDS and only when
5 dealing with certain insurers. I'm not sure of the
6 legality or the reasoning on that. Does that mean that all
7 the other hospitals can engage in the practices that the
8 bill outlaws? We talked about tiering. Since the bill
9 says that a hospital that's a part of an IDS can prohibit
10 tiering, does that mean that all other hospitals can?
11 That's the question. I mean, the bill says that a hospital
12 that's part of an IDS can't unreasonably restrict access.
13 Does that mean that all other hospitals can? Those are
14 questions that you have to have answered in that.
15 Now, we hear that the limit is needed because the
16 only problem really is with hospitals that are part of IDS,
17 not hospitals generally. That may be Highmark's
18 perspective but it isn't the case for all of our other
19 insurers. We face that difficulty in contracting with many
20 hospitals, not just those that are part of IDSs.
21 The bills also make the decision to contract a
22 unilateral one. It's purely the insurer's discretion. We
23 hear that the bill is needed because of consumers, that
24 they want Highmark and UPMC to remain in contract, but
25 you'll note that the bill doesn't require that Highmark 60
1 contract with UPMC or any other hospitals; it only requires
2 that UPMC contract with Highmark if Highmark wants to.
3 There’s no consideration of what consumers want or need,
4 just Highmark.
5 Now, they do require that if the two parties
6 can’t reach a contract that they go into mandatory
7 arbitration. Good luck finding an arbitrator who’s
8 qualified and acceptable to both parties. And because the
9 bill regulates only hospitals, not insurers, and it allows
10 for an indefinite interim contract during that arbitration,
11 the insurer is really under no pressure to be reasonable.
12 It just doesn’t happen there. It also doesn’t provide any
13 parameters for the arbitrator if you’re able to find out.
14 It doesn’t offer any guidance to the arbitrator in terms of
15 pricing or other terms, and in particular, it doesn’t say
16 anything that the arbitrator has to be concerned about the
17 competitive impact of whatever he or she would arbitrate on
18 other competitors. So for instance, the arbitrator could
19 go in, set terms that are very favorable to the insurer but
20 all the other insurers don’t get that benefit. It actually
21 can screw up the competitive balance in the marketplace
22 because it’s a very one-sided aspect. As we talked about,
23 it only applies to certain hospitals, certain insurers, and
24 also if you’re going to have it, there’s no guarantee of
25 consistency among arbitrators. This is not like Major 61
1 League Baseball where you have one arbitration system and
2 everybody gears to what the past arbitrator found, and I
3 have differences with that but at least it's consistent.
4 There's no guarantee or assurance of consistent arbitration
5 results in this, and that will jeopardize competition,
6 particularly among smaller insurers or insurers with
7 smaller market shares.
8 It requires certain conduct from hospitals that
9 are part of an IDS but not for the insurers that are part
10 of that IDS. Again, that goes my point that the bill only
11 regulates hospitals and only certain hospitals but it
12 doesn't regulate the insurers that are also part of an IDS.
13 For instance, the bill prohibits a hospital that's a part
14 of an IDS from subsidizing its insurance. Fine, but it
15 doesn't have that same anti-cross-subsidization provision
16 with an insurer that is part of an IDS. That goes to an
17 underlying problem with we have it. It's an incomplete
18 regulatory framework, and my experience just with insurance
19 regulation generally, incomplete regulatory frameworks
20 never work. When you address one concern, you invariably
21 create other problems that ultimately outweigh the concern
22 that you think you've addressed.
23 What the bill does, putting everything right out
24 in the open on it in terms of some of the specific
25 applications, it requires two competing IDSs -- integrated 62
1 delivery systems -- the two dominant hospitals and the two
2 dominant insurers in that western Pennsylvania region, it
3 requires them to contract with each other. I think that
4 the law should make competitors compete, not collude, and I
5 think the focus ought to be on fairness, integrity and
6 transparency in that competition. Highmark and UPMC are
7 direct competitors. Highmark’s plan is an integrated
8 delivery systems and its plan to save West Penn is based on
9 taking patients and patient revenue away from UPMC. I
10 think that’s good. I think that’s healthy competition. I
11 think that they should be competing vigorously and I think
12 they should be competing evenly. Nobody in that equation
13 should get to pick and choose the law protecting them when
14 they get to contract, when they don’t get to contract.
15 That’s the problem that you have here.
16 Personally, I think that contracts between two
17 directly competing IDSs should be prohibited. I don’t
18 think they should be allowed. I think that if you’re going
19 to allow them, they ought to be held open for public
20 review, not just an arbitrator somewhere off to the side,
21 but public review, public comment and regulatory approval.
22 I think the danger of two competitors colluding is too
23 great. We’ve actually seen that in western Pennsylvania in
24 the past. I don’t want to see that happen again.
25 I ’m also not sure that the State’s ever going to 63
1 be able to set fair terms on those contracts. I ’m just not
2 sure where the office of arbitration is going to be
3 headquartered, but that’s why I do think that the best,
4 fair competition comes through the marketplace, not through
5 State arbitration.
6 I think that bills ultimately undermine
7 competition and choice for consumers on both the health
8 care and the health insurance end. I know that’s not the
9 goal of the sponsors but I think that’s the result. We
10 want West Penn to survive. To do so, it needs more
11 patients, not just more patient revenue but more patients.
12 A UPMC-Highmark contract may be good for Highmark, may even
13 be good for UPMC, but it isn’t good for West Penn and it
14 isn’t good for any other hospitals in Highmark’s IDS or
15 hospitals in that area generally because it takes patients
16 away from them. Nobody likes to think about market share
17 or patient revenue when you’re talking about hospitals but
18 all hospitals are subject to the same business realities
19 the rest of us are. They need revenue, and revenue comes
20 from patients to survive. I think the bill undercuts that.
21 I think it helps Highmark get a favorable contract with
22 UPMC even as it buys up the other hospitals in the region.
23 It’s good for Highmark but I don’t think that’s good for
24 hospitals and it sure as heck isn’t good for the other
25 insurers trying to come into the region. 64
1 What you have is UPMC as the dominant hospital in
2 the region and Highmark as the dominant insurer, and as
3 integrated delivery systems, they are respectively the
4 second largest insurer in the region and the second largest
5 hospital. If you want more competition in both those
6 areas, you’ll keep those two at arm’s length. You won’t
7 force a one-sided marriage at the expense of other
8 hospitals and other insurers.
9 Now, others have testified about what the bills
10 provide, it’s not really an any-willing-selected-insurer
11 but an any-willing-insurer measure. If that were true, I
12 might sign up, but it doesn’t do that universally. It only
13 gives that advantage to some insurers and it only gives
14 that advantage to some insurers for some niche. They’re
15 big but it’s still one portion of the provider network. If
16 you’re going to go that route, why not have it for all
17 insurers and why not have it apply to all providers, all
18 hospitals and all physicians as well? W e ’re not the only
19 one, Highmark isn’t the only one. We all want robust
20 networks and we want it frankly on pricing and terms that
21 we like. To the extent you’re trying to help somebody do
22 that on the insurance end, do it across the problem. The
23 problem you get is that if you go that route, you don’t
24 really know where to stop. You guys have dealt on any
25 number of issues with any-willing-provider laws. Frankly, 65
1 we ’ve heard a lot more about any-willing-provider laws than
2 w e ’ve ever heard about any willing insurer. W e ’ve been
3 joined with Highmark in this. W e ’ve always objected to
4 any-willing-provider laws. But I ’m not sure that if you’re
5 going to have an any-willing-insurer law, I ’m not sure how
6 you say to the provider community that you know, we stopped
7 there, w e ’re not going to go with any willing provider, and
8 as much as we may complain about providers being
9 unreasonably in contracting, I think you’ve all heard and I
10 know I ’ve heard any number of providers complain that w e ’re
11 unreasonable, and so how do you sit there and say gee, you
12 know what, providers, the insurer gets to invoke
13 arbitration but you don’t? I just don’t think that that’s
14 a realistic deal.
15 There has been some talk, gee, if you don’t like
16 this bill, what do you recommend, do you recommend nothing?
17 Actually, no, we have a number of recommendations because I
18 think that in many ways these bills are an opportunity
19 lost. I think that it’s time that everybody sit down and
20 set meaningful parameters around the contracting practices
21 of integrated delivery systems and not just integrated
22 delivery systems but health care monopolies and health
23 insurance monopolies. The bills don’t do it. They only
24 regulate one portion of that entire big picture. The only
25 regulate the hospital that is a part of an IDS. They 66
1 therefore miss the chance to deal with the more
2 encompassing and the broader concerns of regulating IDSs
3 and regulating mega-hospitals and mega-insurers.
4 I'd also say that frankly this is a time we've
5 all seen the ads, even those of us who live in the eastern
6 part of the State, we've all seen the ads and we've all
7 heard the rhetoric on both sides from those two dominant
8 players, Highmark and UPMC. I think it's time actually
9 that we start educating consumers about their options and
10 particularly in that area because that's where it seems to
11 be most unsettled but consumers generally about their
12 options in health care and health insurance, and I think
13 it's time for Highmark and UPMC and everybody else to
14 honestly and openly work together to prepare consumers for
15 a new marketplace. The rollout of PPACA or Obamacare or
16 whatever you want to call it has shown if you don't prepare
17 for change, the change is going to be objectionable. If
18 you do prepare for change, it's actually an inevitable
19 transition and growth. It's not necessarily a bad thing.
20 I think that frankly in the letters, and we have
21 seen a lot of constituent complaints and concerns and
22 they're well founded and they're sincere. What they don't
23 know is what the options are out there. I do think that
24 one of the opportunities lost, I think actually Highmark is
25 dedicated, it has the money and it has the ability, and as 67
1 long as it has the dedication, it’ll be able to build a
2 strong hospital system out of West Penn. I think that’s a
3 good thing. I think the consumer is going to benefit from
4 that. I think they’ll benefit from a new diversity in
5 western Pennsylvania. They’ll have two strong competing
6 hospital systems. They’ll also have several different
7 insurers, not just competing but offering contrasting
8 coverages. You don’t need to get your coverage through an
9 integrated delivery system. You can still get it through
10 an insurance company that is not aligned with a particular
11 hospital. That kind of variety in the marketplace is what
12 inspires not just consumer choice but innovation and cost-
13 effectiveness. You’re only going to get there, though, if
14 consumers understand those options, and that’s going to
15 require a lot more dialog from the people who hold the
16 loudest megaphones. With all deference to all of you, it’s
17 not the General Assembly that holds the loudest megaphones,
18 it’s the people who are out there in the trenches. W e ’re
19 out there, the producer community is out there, employer
20 groups, community groups, labor and all that. The two
21 biggest microphones belong to Highmark and UPMC. I think
22 those are the ones that need to be brought to the table and
23 talk about transitions in the health care market. That’s
24 an enormous task.
25 I’ll offer a closing comment. I understand the 68
1 concern about a monopoly. I understand it on the health
2 care end. I understand it on the health insurance end.
3 That's why we talk about not just the value of competition
4 but the fact that competition is the best regulator. Once
5 you have a monopoly, what you end up doing is more nudging
6 than regulating. You don't control the monopoly. In the
7 end, the monopoly has as much control over government as
8 government does over the monopoly.
9 I've heard from proponents of the bill that they
10 say here, it's pro-competition. I'm telling you as one who
11 represents insurers with market shares that are dwarfed by
12 Highmark, at least on the insurance end, it isn't or we'd
13 be supporting it. We don't want a monopoly in the
14 insurance end, we don't want a monopoly on the hospital end
15 either. What we'd like is to see this as a real
16 opportunity, not a lost opportunity but a real opportunity
17 for a chance to have competition on both ends that
18 ultimately will serve constituents out there and serve as a
19 model because if you pass a State law, it's going to apply
20 across the State that will apply with equal effect in a
21 pro-competition and pro-access way to the insurance and
22 hospital and provider marketplaces across the State.
23 That's a lot, I realize, but it's a big issue, as
24 I know you all realize. Thank you.
25 MAJORITY CHAIRMAN BAKER: Thank you very much for 69
1 your testimony, Mr. Marshall.
2 Representative DeLissio.
3 REPRESENTATIVE DELISSIO: Thank you.
4 A couple comments, and Sam, you’re free to react.
5 I agree that consumers need to be educated and I think we
6 all have a role in doing that. However, we have to ensure
7 that what we are educating them about is not so convoluted
8 it’s not possible to explain it because it’s just so
9 convoluted. You can’t connect the dots in a way that make
10 any sense to explain to them how this works.
11 I saw a clip on ABC’s network, I think, within
12 the last two weeks where the California Hospital
13 Association was trying to explain pricing as it pertained
14 to an outpatient lab versus an in-hospital lab, and the
15 answer was, it’s complicated. That’s not educating a
16 consumer. So again, I think what w e ’re trying to do here
17 is to ensure that the system we will be educating our
18 consumers, our constituents about, our citizens about makes
19 sense and works.
20 I agree that we don’t want to create collusion
21 but one concern would be, when you have two very disparate
22 systems who may have different areas of expertise, if I ’m
23 an insured and can only go in-network to this system but
24 the area of expertise I need is in another system, then I
25 don’t have that flexibility to go to the other system, or I 70
1 do, it’s called out of network and it’s out of pocket and
2 it just financially would bankrupt someone.
3 So the concern is, and I know these systems can
4 evolve over time and grow and evolve, but again, our
5 citizens’ health care needs might be today and much more
6 immediate than that, so I can’t put off my heart transplant
7 surgery or something very dramatic and traumatic for a time
8 when my insurance company is affiliated with, evolves to
9 the point where I feel that’s quality service.
10 So what would be sort of your thoughts as to when
11 we have those kinds of separate systems and there’s no
12 interaction between them, if we have the insurance that’s
13 by those systems as opposed to a commercial insurer who
14 might be in both places, what do we do? Still today,
15 health care insurance products are tied to employment, and
16 even with the Affordable Care Act, that will evolve a
17 little bit differently over time but we still haven’t
18 uncoupled that. So as a citizen, we don’t influence
19 necessarily where our employer chooses to purchase their
20 insurance from, that’s the insurance that w e ’ve got and
21 that’s the hand w e ’re dealt.
22 MR. MARSHALL: I think you had three concerns
23 there, and I ’m going to try to remember them.
24 MAJORITY CHAIRMAN BAKER: If the Members could
25 please because of time constraints limit their questions. 71
1 We have multiple compound questions and we really need to
2 get into singular questions for the benefit of the Members.
3 Thank you.
4 MR. MARSHALL: The chairman is very kind. It is
5 not just a matter of time, it’s a matter of the retention
6 span of the people you’re questioning.
7 But on the education end, I agree with you, it
8 has to be understandable and it has to be understandable
9 for all different levels. The fact that it’s not an easy
10 education curve doesn’t mean that it’s not a curve that has
11 to be taken. I think that it can be done. I represent
12 insurance companies. I ’ve represented across the lines. I
13 remember many years ago when we did the auto law and we
14 introduced the concept of full and limited tort, and
15 everybody said consumers will never understand it. Somehow
16 23 years later, overall they do. Not every consumer
17 understands every aspect but overall the marketplace has
18 shown that they do.
19 You talk about networks, and frankly, what you
20 raise is a question of network adequacy and what happens if
21 a given insurance company or a given integrated delivery
22 system doesn’t have all the services that a patient may
23 need. There are two answers there. First of all, the
24 Health Department won’t license them. You know, for a
25 network to be approved by our Health Department, it has to 72
1 have adequate access to all needed services for all of the
2 members within it both geographically and in terms of the
3 types of service. So that's a regulatory question.
4 Second, it's a marketplace question. The insurance company
5 that doesn't have an adequate network gets rejected by the
6 marketplace, and that goes really to the third question you
7 raised which is that insurance tends to be employer-based,
8 and there's always a suggestion that therefore employees
9 really don't have much say in it. I'd note a couple
10 things, and I'm speaking now as a small employer.
11 Health insurance is probably the most egalitarian
12 form of insurance out there. The CEO gets the same access,
13 the same benefits as the secretary. It's just the way it
14 works. The human resources person who selects the
15 insurance company is bound by the exact same conditions and
16 terms as everybody else in the company. So there's a huge
17 incentive on the part of the employer, not just because you
18 want to have happy employees who stay with you and don't
19 leave you but because of your own self-interest to make
20 sure that the insurance policy, the health benefits that
21 you select and you pay for and all of your employees pay
22 for is one that delivers the care and the access that not
23 just the employees need but that you need.
24 MAJORITY CHAIRMAN BAKER: I would like to
25 acknowledge the presence of Representative Sabatina and 73
1 Representative Stern and would like to recognize our
2 Majority Leader, Mike Turzai, for a question.
3 Representative Schlossberg is here as well.
4 I ’m sorry, there’s lots of enthusiasm for
5 questions, but we really only have time for one more
6 question.
7 REPRESENTATIVE TURZAI: Thank you, Chairman
8 Baker, and thank you for hosting this hearing along with
9 Chairman Fabrizio.
10 Sam, thanks for your testimony. You indicated
11 you thought this was an opportunity for addressing some
12 important issues to provide for healthy competition, a fair
13 playing field, quality insurance, quality care, job
14 retention and job creation, all important objectives. Sam,
15 would those suggestions include changes to Act 94 as it
16 exists? Would your suggested changes address Act 94? I
17 mean, Act 94 does regulate in law, today, correct, the
18 relationship between the Blues and health care providers?
19 MR. MARSHALL: Correct.
20 REPRESENTATIVE TURZAI: So it’s not like w e ’re
21 venturing into new territory here. There is existent law
22 that governs the relationship between the Blues and health
23 care providers, correct?
24 MR. MARSHALL: Generally, it regulates them. Act
25 94, because it only applies to the Blues and not commercial 74
1 insurers, that's a topic for another day whether it ever
2 should have, but what it really regulates is, if a Blue
3 plan and a hospital end up terminating a contract, how's
4 that transition handled. It's not so much gee, you know,
5 if they required that hospitals and the Blues contract with
6 each other, we wouldn't be having this hearing today, I
7 suspect.
8 But you're right. In terms of how you're going
9 to regulate this, that's why I mentioned, I think it's
10 important that we not only regulate integrated delivery
11 systems and particularly within integrated delivery systems
12 the relation between the insurance component and the
13 hospital component of that system but I think we not only
14 have to look at that, we have to look at mega-hospitals and
15 mega-insurers, you know, even if they're not integrated
16 delivery systems. I come from the eastern part of the
17 State. We don't have integrated delivery systems there but
18 we have some very large hospitals and some very large
19 insurers that have a lot of market leverage, and I think
20 you need to look in regulating how you're going to deal
21 with those hospitals and frankly those insurers as well.
22 REPRESENTATIVE TURZAI: Really, just some other
23 suggestions. Antitrust statutes, should they be on the
24 plate for discussion? We don't have a State antitrust
25 statute. And just my last question: do you have anything 75
1 written in terms of suggested changes which would help to
2 reach the objectives that you’ve outlined?
3 MR. MARSHALL: If given the chance to put pen to
4 paper, I ’m more than happy to take you up on that, and I ’d
5 love to be involved with that. I know there’s some efforts
6 in both chambers to do that. If somebody wants to allow me
7 to write the first draft, I ’m happy to do that.
8 REPRESENTATIVE TURZAI: I would just end on this
9 note, and thanks, Chairman Baker. We appreciate everybody
10 taking the time to be at this important hearing. I applaud
11 the chairman for holding it, and thanks for letting me
12 participate.
13 MAJORITY CHAIRMAN BAKER: Thank you, Leader
14 Turzai.
15 Mr. Marshall, you’re free to go. Thank you for
16 your testimony.
17 MR. MARSHALL: Thank you.
18 MAJORITY CHAIRMAN BAKER: Next up is Henry
19 Miller, Berkeley Research Group, LLC. Mr. Miller, you may
20 proceed when you’re ready.
21 MR. MILLER: Thank you. Mr. Chairman, Members of
22 the Committee, thank you very much for giving me this
23 opportunity to testify today.
24 I’m Director of Health Analytics for Berkeley
25 Research Group. More importantly, I worked as a consultant 76
1 to UPMC Health Plan for the past five years, and prior to
2 that, I worked as a consultant to Highmark, Blue Cross of
3 Northeastern Pennsylvania and the Commonwealth’s Department
4 of Public Welfare.
5 What I want to talk to you about today focuses on
6 the nature and importance of integrated delivery networks,
7 first, and then specifically, the potential impact of the
8 House Bill 1621 and 1622 on the costs and quality of health
9 care in Pennsylvania.
10 I’ve conducted research and consulted in health
11 care issues for more than 40 years. During this time I ’ve
12 observed changes brought about by Medicare and Medicaid,
13 development of managed care and other events that have
14 shaped our health care system. I’m actively involved in
15 assessing the impact of the Affordable Care Act as well and
16 the way in which it’s changing how health care is financed
17 and delivered.
18 First, in regard to integrated delivery networks,
19 I want to make it clear, these are not new entities.
20 Consolidation of hospital systems is a longstanding trend
21 that’s accelerating since the passage of the Affordable
22 Care Act. From 2000 to 2010, in the 10 years prior to the
23 passage of the Act, about 500 hospitals across the country
24 were acquired or merged into larger systems. In the first
25 three years since the Act’s passage, more than 300 77
1 additional hospitals were acquired or merged. In a recent
2 survey that was conducted, only 13 percent of hospital
3 executives said that their hospitals were not considering a
4 merger or acquisition opportunity. The reason for that is
5 that lower margins, particularly on patients funded by
6 Medicare and Medicaid, as well as competition from other
7 types of providers are forcing smaller hospitals to find a
8 haven in which they can continue to survive.
9 The Affordable Care Act is also changing the
10 health insurance environment. The Act requires insurers,
11 as you heard, to spend 80 percent of their premiums that
12 they collect for individuals and 85 percent of the premiums
13 they collect for groups on medical care and some related
14 activities. That obviously cuts into potential profit and
15 surplus. Competition among insurers is up as a result but
16 profits are down. Health insurers are seeking
17 opportunities for consolidation as well. And even though
18 health care delivery and finance have been separate
19 activities in the United States in the past, as health
20 insurers look for new profit opportunities and hospital
21 systems grow larger, the two activities are converging.
22 It’s more than Highmark purchasing providers to establish
23 its own network. Kaiser, of course, has been both a
24 provider and an insurer since the end of World War II.
25 More recently, United and Cigna purchased physician 78
1 practices and physical management companies. Humana
2 purchased a national network of urgent care centers, and
3 WellPoint purchased a network of 26 primary care clinics in
4 California.
5 At the same time, hospital systems are starting
6 insurance companies. W e ’re familiar, of course, with UPMC
7 and Geisinger but there are many others. Johns Hopkins
8 Health System in Baltimore owns and operates the Johns
9 Hopkins Health Plan. Intermountain Health Care in Salt
10 Lake City owns and operates an insurer named Select Health.
11 Sharp Health Care, one of the larger hospital systems in
12 California, also operates its own health insurance
13 subsidiary.
14 Earlier this year, a survey by the Advisory
15 Board, which is a national research organization focused on
16 hospitals, found that 18 percent of hospital systems
17 already operate their own health insurance company and
18 another 28 percent intend to launch one in the next few
19 years.
20 Integrated delivery networks are becoming a key
21 element of American health care. More importantly, they
22 offer outstanding opportunities for improving health care
23 value. Value, better quality at lower prices, is enhanced
24 by competition. Unlike independent hospitals and insurers,
25 integrated delivery networks are judged by both the quality 79
1 of care provided to patients and the cost of coverage
2 purchased by consumers. Their ability to enhance health
3 care value at a rate greater than competitors will be the
4 primary determinant of their success.
5 We all know how complex the health care system
6 is, and I personally appreciate that; it’s given me a
7 career. But that complexity means that House Bill 1621 and
8 1622 won’t work. They’ll constrain integrated delivery
9 networks, they’ll limit opportunities to enhance value
10 rather than promote it. For example, the bills place
11 responsibility for health care pricing in the hands of
12 insurers. If a health care system and an insurer can’t
13 reach an agreement, they enter into a default agreement
14 that prescribes one of three rates. These rates offer no
15 real choices.
16 The first one, the rate paid by the insurer for
17 single services, the hospitals in its network would allow
18 an insurer to negotiate low rates with a handful of
19 hospitals that may be struggling for patient volume and
20 then force other hospitals to accept those rates. The
21 second rate, the rate paid by the insurer based on its
22 formula for out-of-network payment, leaves the
23 determination of the rate entirely to the insurer. There
24 is no standard approach for out-of-network payment to
25 hospitals. If the insurer establishes a formula that pays 80
1 rates below hospitals' costs, the bill would require
2 hospitals to accept that rate. The third rate is the
3 Medicare rate, but nationally, two-third of hospitals have
4 paid less than their costs by Medicare. Medicare's overall
5 rate of payment covers only 90 percent of Medicare
6 patients' hospital costs. Medicare payment rates are
7 ultimately set by Congress where the concern is the impact
8 of the rates on the Federal budget and not on patients.
9 The default agreement would be replaced by an
10 arbitrator's decision but House Bill 1621 doesn't recognize
11 the complexity of insurer-provider contracts. Insurer-
12 provider contracts include far more than the rates for
13 care. Contracts identify how claims will be submitted, how
14 medical necessity will be determined, how services provided
15 to patients will be reviewed, and many other aspects of the
16 relationship. Moreover, methods for paying for hospital
17 services are complex.
18 For case payments can be based on different
19 definitions of cases. There can be per diem payments,
20 percentage-of-charge payments and bundled payment rates.
21 They are all available to pay for inpatient care. Per-
22 visit payment, which can also be based on alternative
23 definitions and fee schedules and percentage-of-charge
24 payments are available for outpatient services. Because
25 there are so many different ways to address the many 81
1 aspects of hospital contracts and because both sides will
2 know that arbitration is automatically available, few
3 contracts will be accepted prior to arbitration.
4 Arbitration will be complex and time-consuming and will
5 require arbitrators with unusually extensive knowledge of
6 the insurer and provider contract environment.
7 Health care innovation is critical to improving
8 health care value. Today innovations in medicine and the
9 delivery of care extend life, improve the quality of
10 patients' lives and improve the ways in which care is
11 delivered. It's providers, not insurers, that foster these
12 innovations but they require financial resources to do it.
13 The bills give too much control over financial resources to
14 insurers. The desire to compete with other insurers on the
15 basis of lower premiums will ultimately limit resources
16 available for innovation and will assure Pennsylvanians
17 that their local health care system will lag behind States
18 where innovation is encouraged.
19 There is no question that there is an ongoing
20 need to improve value in our health care system. House
21 Bill 1621 and 1622 seek to add value by regulating the
22 insurer-provider relationship and forcing providers to
23 contract with any willing insurer but past efforts to
24 regulate hospitals in similar ways have failed. The
25 government has failed in its regulatory effort. Between 82
1 1970 and 1995, 12 States either seriously considered or
2 implemented hospital rate regulation. Eleven of those
3 States abandoned the approach in favor of competition, and
4 only one State, as we heard, Maryland, retained hospital
5 rate regulation, but what we didn’t hear is that this year
6 the Maryland Hospital Rate Setting Commission abandoned the
7 approach it had used for the last 30 years and instead
8 adopted a new approach based on population-based health
9 instead of hospital rate controls.
10 There is no evidence that hospital regulation can
11 improve the value of health care. In fact, research shows
12 that competition rather than regulation reduces costs and
13 improves quality. The development of two strong integrated
14 delivery networks in western Pennsylvania provides an
15 outstanding opportunity to take advantage of the benefits
16 of competition. House Bill 1621 seeks to constrain these
17 systems because they also operate as insurers but it is
18 because they operate as insurers and providers that they
19 can compete to provide lower premiums and higher-quality
20 care to employers and to patients.
21 Health care value can and should be improved but
22 House Bill 1621 and 1622 instead will make sure that the
23 status quo of higher than necessary health services
24 utilization and the need to improve quality of care will
25 continue. Worse, it will mean that Pennsylvania will lose 83
1 the opportunity to gain from the improvements in value
2 brought about by competition that the rest of the U.S. will
3 experience in coming years. Pennsylvania can lead the
4 nation in the development of competitive strategies to
5 improve health care value but House Bill 1621 and 1622 will
6 instead force Pennsylvania to lag behind.
7 This issue obviously is very complicated. I
8 think the bills move too quickly to find a rapid solution.
9 There’s no question that access is a concern. There’s no
10 question that value is a concern. But at the risk of
11 recommending that the issue be studied further because I ’m
12 somebody who studies these issues further, given that risk,
13 I believe that there’s more attention that has to be paid
14 to solutions before one like this is tried.
15 Thank you very much, Mr. Chairman and Members of
16 the Committee.
17 MAJORITY CHAIRMAN BAKER: Thank you, Mr. Miller.
18 Members, questions?
19 Representative Frankel.
20 REPRESENTATIVE FRANKEL: Thank you, Mr. Chairman,
21 and thank you, Mr. Miller.
22 It seems to me that competition, provider
23 competition, is not just based on innovation. There has to
24 be an element of price competition. You cannot get to
25 price competition by creating a silo where a provider has a 84
1 captive group of insured through their own insurance
2 company or others so that they aren’t competing against
3 another provider. They have their own captive group of
4 clients. So they can set the price because the clients
5 aren’t going to be able to go out and compare price of
6 another high-value, low-cost provider. So they’re
7 insulated, so the competition, yes, you have insurance
8 company competition. Insurance company competition is with
9 one provider system ultimately that doesn’t have a
10 countervailing check and balance of low-cost, high-value
11 provider. The innovation is great, and these integrated
12 delivery systems can do that and hopefully will, and I
13 think Geisinger has shown that to a large extent, but
14 fundamentally, innovation that can be priced at whatever
15 level it wants to be priced at, whether it’s bundled
16 payments or whatever, needs to have a check and balance
17 with the other systems. So there needs to be cross
18 fertilization, direct provider-on-provider competition in
19 order to check the excesses that we see in the cost of
20 health care. After all, this country now spends 16 percent
21 of GDP on health care, headed to 20 percent by the end of
22 the decade. The rest of the developed world spends 10
23 percent. They’re healthier, longer life expectancy, less
24 infant mortality, lower rates of chronic illness.
25 So w e ’re paying a lot more and not getting great 85
1 value, and one of the ways I think that we need to get
2 great value and bend the cost curve is to pit a provider
3 against a provider. The innovation is important, I agree,
4 but innovation can take place along with price competition
5 by pitting providers against providers, and that’s what
6 these bills seek to do. They may be flawed. There may be
7 amendments, and as I said, Jim and I have been open to it
8 and I think w e ’ve heard some great recommendations here
9 today, but there has to be provider-versus-provider
10 competition.
11 So I want to ask you, why is competition in silos
12 the only way to have competition?
13 MR. MILLER: Well, the answer is that while I
14 agree with you in terms of all of the things that you said
15 about the need to enhance value and our American health
16 care system really doesn’t stand up well in comparison to
17 other systems in many parts of the world, I don’t agree on
18 the issue of silos, as you’ve described them.
19 The health care environment is pretty dynamic.
20 Let’s take a specific instance. If you have two competing
21 integrated delivery networks, and they are only serving
22 their own patients, assuming that’s the case -- of course,
23 they would have to serve lots of other patients too,
24 Medicare and Medicaid -- but assuming they’re just serving
25 their own patients, they have to sell their coverage and 86
1 that coverage is going to be very competitively priced
2 between the two of them because the employer that purchases
3 coverage gets the opportunity to make that decision
4 frequently annually, sometimes every other year. They make
5 that decision fairly frequently as to whether or not
6 they’re paying too much and not getting the value in
7 comparison to the other competitor. I think your example
8 would work if there was only one integrated delivery
9 network in a community but as long as there’s more than
10 one, there’s price competition, and the provider can’t
11 charge whatever they want if they’re charging it to their
12 own insurance operation when that insurance operation
13 exists in a competitive environment.
14 So I don’t think that what you’re saying is
15 necessarily the case and I think that you would find that
16 that competition that changes the competition for providers
17 competing for insurer business to changing the competition
18 to integrated delivery networks competing for opportunities
19 to sell coverage and providing value simultaneously is
20 really what we need to do.
21 REPRESENTATIVE FRANKEL: Thank you. I would say
22 I think that having both competition between insurers and
23 providers is the best way to get to the result. True
24 marketplace competition across the board will result in
25 innovation, lower health costs and better outcomes for 87
1 Pennsylvania.
2 Thank you.
3 MAJORITY CHAIRMAN BAKER: Representative Brown.
4 Waives on?
5 Representative Christiana.
6 REPRESENTATIVE CHRISTIANA: Thank you, Mr.
7 Chairman.
8 Mr. Miller, thank you for your testimony. I just
9 have a pretty simple question. These contracts were set to
10 expire at the end of last year, and if House Bill 1621 and
11 1622 is harmful to the environment and the marketplace as
12 you have said and the previous testifier said, then why
13 over the last 12 months have they colluded successfully,
14 and to be honest, no one's went out of business, aside from
15 a few patients that have been rumored to be denied access
16 because they had the wrong insurance card, whether that's
17 true or not. It seems that the marketplace doesn't have
18 unrest and that people are getting taken care of. No
19 facilities have closed because they're colluding together.
20 And for the next 12 months, if they continue to collude
21 together, it seems as if both systems will successfully
22 compete and work to deliver the best care possible.
23 National commercial insurers are now in the marketplace,
24 thank goodness. They were locked out for quite a long time
25 in that region. This bill, if it would have been in 88
1 existence 10 years ago, would have made sure that the
2 mutual insurance monopoly and the provider monopoly didn't
3 exist. I would actually say this protects competition
4 because it stops these integrated delivery networks from in
5 a couple years choosing that instead of working with three
6 national insurers, we're only going to work with the two
7 highest-paying ones, and then after those contracts expire,
8 well, we're only going to accept one national insurer and
9 our own regional insurance. This protects that from
10 happening.
11 So my comment is, if this bill in its desired
12 outcome is so harmful then why haven't we seen unrest in
13 the marketplace over the last 12 months?
14 MR. MILLER: Well, as I understand it, it's
15 because the two primary antagonists in this issue in
16 western Pennsylvania have continued to operate under the
17 agreements that they had in place. I don't think they're
18 colluding. They're doing anything but colluding, as far as
19 I can tell. I think that instead, they're biding their
20 time and they're waiting for the opportunity for each of
21 them to implement their own strategy, and that can't occur
22 until the contracts are no longer in place. So I wouldn't
23 expect there to be difficulty now. I think the issue is
24 what happens after the contracts are no longer in place.
25 REPRESENTATIVE CHRISTIANA: For their strategy or 89
1 their business plan. I mean, granted, if they want to have
2 a closed network system, if that’s their business model,
3 then sure, unrest in the marketplace and chaos and people
4 switching insurance is going to be beneficial long term,
5 but if this place is in place and contracts had to be
6 reached -- and let’s be honest, w e ’ve heard this morning
7 that arbitration isn’t a great process and it’s expensive
8 and burdensome. Well, the point isn’t to go to
9 arbitration. The point is, like Geisinger, for competitors
10 to be able to reach a contract in the best interest of the
11 patients. Arbitration I don’t think was put in this bill
12 as a place where we wanted to end up. It was put in place
13 where if a high-paying executives can’t reach an agreement,
14 then there’ll be a process in place, which we could put
15 arbitrary rates in place, we could put the rates in place
16 from the government standpoint.
17 I thought the most responsible way would be to
18 have an arbitration process, but if there’s other
19 suggestions that you have or other interest groups that say
20 no, this will solve the situation better, I think
21 Representative Frankel and I are open to that, but I don’t
22 think arbitration was meant to be where we wanted this to
23 end up. It was meant to be a deterrent.
24 Thank you, Mr. Chairman.
25 MAJORITY CHAIRMAN BAKER: We have time for one 90
1 more question, unfortunately. I know there’s other Members
2 seeking recognition, so we have time for one question from
3 Representative Benninghoff.
4 REPRESENTATIVE BENNINGHOFF: Thank you, Mr.
5 Chairman. I ’ll try to keep this relatively brief.
6 There’s been a lot of dialog and buzzwords
7 talking about competition and cost and all those types of
8 things, and it’s been my interactions with people,
9 specifically to one of our earlier testifiers, that some of
10 the health care systems are trying to focus more on quality
11 outcomes versus billing for procedures, which I think has
12 been a problem nationally and continues to be. I thought
13 the earlier testimony by the gentleman from Geisinger was
14 almost self-diagnostic. They had an integrated system that
15 works pretty well. They allow other people to enter their
16 network, and frankly, the contractual agreements were
17 successful because people were happy with the product.
18 So my question is, why would we want to intervene
19 with that regardless of the geography across the
20 Commonwealth as a government agency, and more importantly,
21 what can we do better to focus on quality outcomes if w e ’re
22 really talking about what’s best for patients versus
23 buzzwords of competition and cost.
24 MR. MILLER: Well, Geisinger is unique. I think
25 we have to accept that, not completely unique but certainly 91
1 unique in the eastern United States, and part of the reason
2 it’s been able to do what it does is because it’s had a lot
3 of time in comparison to the other entities that w e ’re
4 talking about who, given the same amount of time, might
5 also reach the point where they would sufficiently mature
6 where they could focus on being paid on outcomes. But it’s
7 hard. It’s a hard thing to do to create a system where
8 that occurs but it is nevertheless a goal. But the one
9 thing that I disagree with you on is I think if there is
10 real competition between two strong entities, that that
11 competition would result in opportunities to behave like a
12 Geisinger, to seek out the things that Geisinger is seeking
13 out, paying on outcomes, because if it was one entity by
14 itself, I would think that’s not going to happen, but as
15 long as there’s competition for the dollar, which in this
16 case means pretty much the employer’s dollar as well as any
17 individual dollars that then there’s going to be this
18 effort on their part to create innovative ideas along the
19 liens of Geisinger.
20 REPRESENTATIVE BENNINGHOFF: I appreciate your
21 answer because I don’t want to come up with a solution that
22 five years down the road then segregates out another
23 emerging smaller, younger health care provider or insurer
24 as well.
25 Thank you, Mr. Chairman. 92
1 MAJORITY CHAIRMAN BAKER: Mr. Miller, you had
2 intimated earlier that upon the completion or conclusion of
3 the existing contracts that there may be some activity or
4 conclusion to this dilemma. Did you have any idea as to
5 when those contracts end?
6 MR. MILLER: Well, I ’m assuming that they will
7 end at the end of next year.
8 MAJORITY CHAIRMAN BAKER: End of next year?
9 MR. MILLER: Next year, 2014.
10 MAJORITY CHAIRMAN BAKER: Okay. Thank you very
11 much. Thank you for your testimony.
12 Our next testifiers are Dr. William Winkenwerder,
13 President and CEO of Highmark Health, and Deborah Rice-
14 Johnson, President of Highmark Health Plan. Welcome.
15 You may proceed. Thank you.
16 MR. WINKENWERDER: Chairman Baker, Members of the
17 Committee, Leader Turzai, good morning. My name is Bill
18 Winkenwerder. I ’m the President and CEO of Highmark
19 Health, and with me today is Deborah Rice-Johnson, who’s
20 the President of Highmark Health Plan, which is our health
21 insurance business.
22 First, let me just say I commend you for holding
23 this hearing. The topics that w e ’re discussing today are
24 very important for all the people of the Commonwealth, and
25 health care is a critically important topic, and the cost, 93
1 quality, availability, affordability of it is very
2 important and on everyone’s minds.
3 I ’m here today to offer comments on House Bill
4 1621 and 1622 and explain why we believe this legislation
5 is a vital step toward protecting some fundamental values
6 about health care that are important to all of us. We
7 strongly support this legislation because we believe it
8 will preserve the ability of people to choose their health
9 plan, choose their hospitals, choose their doctors, and to
10 do that affordably, and that’s important.
11 It will also stimulate, we believe -- I ’ve been
12 listening to the discussion and I know there are views on
13 all sides here but we believe it’ll stimulate true
14 competition where health care providers and insurance
15 companies compete based on delivering high-quality care and
16 affordable cost, and that’s what healthy capitalism is all
17 about. I ’m strongly supportive of that overall concept.
18 What we must stop in its tracks, I believe, is a
19 trend by which hospitals and health systems join together
20 not just to achieve efficiencies of scale or better systems
21 of care, and we commend the work that Geisinger and others
22 have done for coming together and achieving some of those
23 great outcomes, but to reduce competition and limit
24 consumer choice so that they and not the market control
25 where and to whom health care is delivered and at what 94
1 price. This legislation will help guarantee that
2 community-based hospitals and health care systems built by
3 and supported by -- and I think this is important that it
4 was noted earlier today -- community donations, taxpayer
5 dollars, government subsidies and insurance premiums are
6 open to everyone without qualification. After all, these
7 are charitable institutions.
8 During the day, you have heard and will hear
9 different perspectives about what this important
10 legislation will mean for health insurers, hospitals, the
11 health care marketplace. However, in my opinion, the
12 guiding purpose of this legislation is to do what's right
13 and what's fair for Pennsylvania consumers: making sure
14 they can select doctors and hospitals of their choice,
15 making sure that continuity of care is maintained and
16 making sure that they're not forced to abandon unduly for
17 the wrong reasons their personal physician.
18 These are the real concerns of your constituents
19 in the Commonwealth, many of whom are also Highmark
20 members, which number about 3^ million Pennsylvanians.
21 These are the real concerns of thousands of Pennsylvanians
22 who have written to you and other Members of the General
23 Assembly in support of this legislation.
24 As you are well aware, the health market is going
25 through unprecedented change driven by all the things we've 95
1 talked about -- health care reform, rising cost, and the
2 need to improve quality and transparency and safety.
3 Another less publicized but no less important
4 change is hospital mergers and acquisitions and beyond
5 that, the merging of those systems with health insurers. I
6 think that the previous discussion spoke very eloquently,
7 and I take no issue with their description of these trends.
8 They're important. That's why it's important that you're
9 here addressing them.
10 But with all this news about hospital mergers and
11 acquisitions, it's logical, I think, for consumers and
12 patients to wonder who's thinking about them and their
13 families and who will protect them if they are forced to
14 switch doctors or if their health insurance no longer is
15 fully accepted at their most convenient facility where they
16 work or where they live, and we believe this legislation,
17 if enacted, will show that you and government can work for
18 what's best for the people.
19 I'm not going to go over all the data I have here
20 in front of me but just a couple of highlights about the
21 mergers and acquisitions in the health care delivery sector
22 that more than doubled from 50 in 2009 to 105 in 2012.
23 Hospitals acquired almost 20,000 beds nationally in 2012
24 alone. That's three times the number of beds acquired in
25 2008. We're also seeing many hospitals aggressively buying 96
1 independent physicians and physician practices. In 2000,
2 just 13 years ago, 70 percent of medical practices were
3 independent while hospitals owned less than 25 percent.
4 Now the tables have turned, and hospitals own nearly 70
5 percent of medical practices. As a result, independent
6 physicians are starting to become rare species. Young
7 physicians essentially are going to work for large systems,
8 and so the number of independent practitioners is dwindling
9 with every day, and that’s just a reflection of the market
10 and change. We don’t decry that. That’s part of what’s
11 happening. We must deal with it.
12 But why are smaller hospitals and physician
13 practices combining with larger systems? Well, several
14 forces are driving this, and I think w e ’ve covered this
15 already -- the Affordable Care Act, the migration of
16 patient care from inpatient to outpatient settings, changes
17 in payment from fee for service to more pay for performance
18 and just the risk associated with getting up and delivering
19 cost-effective health care. It takes resources and capital
20 today. You can’t do it today. You could do it 25, 30
21 years ago.
22 So faced with those increasing financial
23 pressures and cuts in Medicare funding, hospitals feel
24 compelled to join with other institutions and doctors to
25 create larger systems that can generate a predictable and 97
1 steady supply of patients and capture more revenue. A
2 recent Forbes magazine article observed that hospitals are
3 reaching a strategic inflexion point, meaning that the
4 hospital industry has arrived at a defining moment when the
5 rules of the game have begun to change and they need to act
6 swiftly to preserve their financial interests and their
7 independence. Again, we don’t decry those changes. That’s
8 just part of what’s happening. They’re making decisions
9 they have to make or feel that they have to make to deal
10 with the marketplace, their response to all of those
11 changes.
12 Additionally, health systems are taking on new
13 roles, however, and becoming health insurers. Spurred by
14 health care reform and the creation of the health insurance
15 exchanges, health systems are weighing the risks and
16 benefits of becoming a payer in this ever-evolving
17 industry. In fact, in a June 2013 survey just a few months
18 ago by the Advisory Board in Washington, D.C., a think
19 tank, it was revealed that one in five such health systems
20 plan to launch an insurance plan just in the next two or
21 three years. So that change is afoot.
22 To ensure that the price of medical services is
23 not set by one health system and to preserve patient
24 choice, communities across the Commonwealth need more, not
25 less, provider competition, and that’s the reason that 98
1 Highmark formed the Allegheny Health Network in the western
2 region of the State. The Allegheny Health Network is
3 starting to make tangible progress towards achieving true
4 provider competition in western Pennsylvania, and this will
5 be built around delivering high-quality care at a more
6 affordable cost and the care that’s transparent, the cost
7 that’s transparent to the consumer.
8 The risk that the Commonwealth must guard
9 against, in our view, and I think it’s been alluded to,
10 Representative Frankel, is cartel-like competition where
11 there’s not choice or without choice where large systems
12 and not the free market control the price of medical care
13 because that institution or large numbers of providers
14 within it are a must-have provider in the health plan’s
15 provider network. This becomes even more problematic when
16 a large provider system operates its own health insurance
17 company, and I would agree with Representative Christiana’s
18 sort-of scenario of what the future could hold for us if
19 that cartel-like power is unchecked in terms of
20 sequentially reducing competitors in the insurance
21 marketplace. So I would argue that this legislation is not
22 just about ensuring provider competition but it’s
23 ultimately about ensuring intercompetition in the longer
24 term.
25 The refusal of a large health system to sign 99
1 agreements with Pennsylvania insurers while having
2 contracts with health insurers out of State does also have
3 some impact on our local economy here. Now, I would be the
4 first to say that we welcome all competitors, and that is
5 fine and that is good, but we like to think that we add
6 something different here in the State of Pennsylvania. I
7 want to add that at Highmark when we include our historical
8 support for those who otherwise could not obtain health
9 insurance, we contribute more than $100 million a year for
10 charitable purposes. That’s a lot that gets put into this
11 State and into our communities. We don’t see that coming
12 from our competitors, so I would just ask that people take
13 that thought into consideration.
14 Opponents of the legislation will argue that the
15 government shouldn’t interfere. W e ’ve heard that with the
16 business affairs of the health care marketplace. But the
17 delivery of health care is one of the most critical and
18 heartfelt elements of people’s lives. It’s not like making
19 widgets. Yet when the potential harm to consumers is so
20 closely linked to their day-to-day health and well-being, I
21 believe, we believe that definitive rules do become
22 imperative to protecting the interests of the public and
23 the community, and in this case, the government is acting
24 to ensure that consumers have choices and that they are
25 protected. You’re not acting, as I understand the 100
1 legislation, to require consumers to do anything. This is
2 about protecting consumers, not requiring them to do
3 anything.
4 I also found it a little bit curious that one of
5 the prior persons testifying here from the for-profit
6 health insurance industry seems to have the sort of flip-
7 flopped position about the role of government to preserve
8 consumer choice, and I ’d like to read a quote from the CEO
9 of HealthAmerica’s Pennsylvania’s operations that was
10 delivered not too long ago in April 2012: "HealthAmerica
11 supports competition among health care providers and
12 insurers. We support consumer choice and we support health
13 care accessibility and affordability. We believe that
14 legislative and regulatory actions may be necessary to
15 achieve and ensure these goals for the patients and the
16 health care consumers in western Pa."
17 So sometimes your perspective depends upon where
18 you sit and sometimes that can shift over time. For-profit
19 health insurers in Pennsylvania wanted tighter government
20 regulation to pursue their interests when it applied to
21 Highmark’s integrated delivery network but now there seems
22 to be a perspective, a sort of hands-off approach when it
23 applies to other networks, but we believe we need a common
24 set of rules that applies to everybody.
25 The increasing consolidation of hospitals and 101
1 physician practices and the growing power of large health
2 care systems is creating some fear and uncertainty among
3 Pennsylvanians, especially in western PA. Market power due
4 to provider consolidation is not confined to one area of
5 the State. While the impact is currently being felt more
6 in western PA, there's no doubt that other regions of the
7 State could soon experience the effects of provider
8 consolidation.
9 Let me just move forward, in the interest of time
10 here, to touch on a couple of things here. As we see it,
11 you know, as things stand today, the current laws and
12 regulations we believe do not adequately safeguard the
13 public against a growing market consolidation of health
14 provider systems, integrated delivery networks that have
15 emerged in the past few years, and that we expect will
16 continue to expand. To be specific, we believe the State
17 lacks clear authority to prevent a large hospital or a
18 doctor affiliated with a large delivery system from denying
19 affordable access to care or refusing to treat longstanding
20 patients, even if patients are in the middle of treatment,
21 and the irony is, as we've talked about, most such systems
22 are constituted as charities, not-for-profit 501(c)(3)
23 entities whose purpose is to serve the communities.
24 Some skeptics will maintain that since no other
25 States have passed legislation regulating the business and 102
1 conduct of large health systems, why in the world are you
2 doing this here in Pennsylvania, or thinking about it. The
3 reality is that delivering and financing of health care
4 across the country is entering uncharted waters. Things
5 are changing. Provider consolidation, interconsolidation
6 and the formation of well-financed integrated delivery
7 systems are increasing significantly and inevitably leading
8 to some higher prices. Pennsylvania consumers are feeling
9 the effect of these higher prices now, and if you don't
10 fully trust what I'm saying, I think you can pick up a few
11 recent issues of the New York Times, Time magazine and
12 other sources that speak to the issue of price increases in
13 the provider sector and what that means for the cost of
14 health care.
15 As large systems employ, acquire or effectively
16 control previously independent physicians or physician
17 practices, well-established doctor-patient relationships
18 are being put at risk and the continuity of patient care
19 has the potential to be severely disrupted. We don't take
20 that lightly. In addition, if previously competing
21 physicians are consolidated, there's less competition among
22 these physicians.
23 So House Bill 1621 and 1622 represent an
24 important first step towards addressing the concerns of
25 individual consumers and employers about the market power 103
1 of large health systems. We believe the bill also benefits
2 health care providers as well by setting predictable ground
3 rules for them in today’s changing health care environment
4 and advancing the core objective of health care reform,
5 lower cost, higher quality and consumer choice.
6 I believe Pennsylvania has an opportunity to be a
7 model for other States. We can show the nation how to lay
8 out an appropriate and responsible foundation for the
9 changing health care marketplace and one that preserves
10 consumer choice, encourages open competition based on real
11 value rather than the market size, maintains continuity of
12 patient care and ensures affordable access to all
13 charitable health care institutions regardless of a
14 family’s insurance carrier.
15 In closing, I just want to return to
16 Representative Christiana’s comment earlier this morning
17 about the central importance of stewardship. I could not
18 agree more strongly. At Highmark, we have seven statements
19 in our values, our corporate values, and the first of this
20 is stewardship. We believe this is a stewardship issue.
21 It is about doing what’s right for people and what will
22 preserve consumer choice and fairness in the marketplace,
23 and that is what we believe and w e ’re here to help and to
24 pursue that objective with you.
25 And with that, I ’d like to turn it over to Deb 104
1 Johnson.
2 MS. RICE-JOHNSON: Thank you, Bill, and also,
3 thank you, Committee, for having us here today and the
4 opportunity to speak to you about this important issue.
5 You know, in Pennsylvania, and w e ’ve all talked
6 about it, there’s a lot of hospital consolidation. It’s a
7 trend and it’s something that w e ’re seeing more and more of
8 and virtually every geographic region in the Commonwealth
9 is impacted, whether it’s Bloomsburg, Lewistown, Altoona,
10 Erie, Pittsburgh or Philadelphia. They’re all parts of
11 larger health care systems. In Wilkes-Barre, for example,
12 the number of organizations operating hospitals has shrunk
13 from five to two in just the last four years. That’s very
14 significant.
15 So what we have to ask ourselves, is this trend
16 bad? Is consolidation bad? And we would say not
17 necessarily. Frankly, provider consolidation allows these
18 operating systems, these health care systems, achieve
19 economies of scale, reduce duplication, look at investing
20 capital differently, and it also helps improve how they
21 allocate costs, all of this which could lead to operating
22 costs being reduced, and end result, lower health care
23 costs and improved quality of care.
24 So as far as the health care landscape changing
25 in Pennsylvania and the larger health systems’ control of 105
1 care delivery systems in the many geographic areas, the
2 basic question is whether all this provider consolidation
3 activity benefits our consumers. Unfortunately, there is a
4 mounting body of evidence suggesting that dominant provider
5 systems resulting from acquisitions and consolidations may
6 be harmful to patients, particularly around health care
7 costs and from a financial perspective, employers,
8 physicians and the public at large in some instances.
9 As payers and users of the health care system, we
10 realize the cost of health care is ever increasing and it’s
11 become something that’s not easily controlled. Rising
12 health care costs have become the primary reason a number
13 of Pennsylvanians are going uninsured: 1.2 million
14 uninsured Pennsylvanians today, and unfortunately, health
15 care reform is not going to solve that problem completely.
16 Among the reasons for increasing medical cost is
17 provider consolidation. When hospitals consolidate, either
18 merging hospitals or buying physician practices, as Dr.
19 Winkenwerder mentioned, health care prices increase,
20 sometimes by as much as 20 percent, and there’s history to
21 prove a point to that. The reasons are simple: provider
22 consolidation allows hospitals and systems to have greater
23 leverage in contracting with commercial health insurers.
24 That is complicated even further whenever that health care
25 delivery system also owns an insurance partner, so 106
1 resulting in higher prices, higher cost for patients,
2 higher insurance premiums and no guarantee to improve the
3 quality of care. Spending on hospital care represents
4 about one-third of the total premium that individuals could
5 be paying. That’s twice the expenditure of physician
6 costs.
7 So when large hospital systems and health systems
8 use their market strength to demand excessive
9 reimbursements from private insurers, that translates into
10 higher hospital costs, drives up the overall medical costs
11 and insurance premiums for consumers and the entire
12 community. This is why we see employers across the country
13 becoming more and more concerned about cost and looking at
14 and purchasing tiered products that we talked about earlier
15 that are based upon value, value representing quality and
16 price. We are firm believers at Highmark that tiered
17 products must be based upon quality and price both.
18 And so as we continue to look at the products
19 being offered w e ’re also looking at value-based
20 reimbursement. We too believe, just as the representative
21 from Geisinger suggested, that we need to find new ways to
22 reimburse, whether it’s bundled payments or other value
23 payments. That is the only way w e ’re going to find ways to
24 control the health care cost.
25 So a number of studies can confirm the link 107
1 between provider consolidation and higher cost, and there's
2 been a number of articles and studies performed, one in
3 particular by James Robinson, who's a professor of health
4 care economics at the University of California, points to
5 the fact that concentrated markets where there is one
6 provider, no competition, prices are higher than otherwise
7 similar areas or geographies where there is competition. A
8 2010 article, just to go further, in the policy journal,
9 Health Affairs, reported that growing market power of
10 providers to negotiate higher payments for private insurers
11 is the elephant in the room that's rarely mentioned.
12 And just two weeks ago, a new study in the
13 Journal of the American Medicine Association underscored
14 the point that hospital mergers and consolidations often
15 tend to drive up medical cost. Whether it's Ohio to
16 Florida to California, North Carolina, large health systems
17 are buying up hospitals and purchasing doctors. As Dr.
18 Winkenwerder mentioned, it's becoming an anomaly whenever
19 you can find independent physician practices or young
20 physicians entering into the market that are going into
21 private practice or remaining in private practice.
22 Here's one common example in Pennsylvania that
23 directly affects cancer victims. Some large health systems
24 have significantly increased the cost to consumers of
25 providing infusion chemotherapy by changing the way that 108
1 they’re billing for those services, nearly tripling the
2 cost, tripling the cost to employers and tripling the costs
3 for those individuals who are purchasing those services and
4 have cost-sharing provisions within their benefit plans.
5 These same large systems can deny affordable patient access
6 to charitable community health care institutions, disrupt
7 the continuity of care, and that’s really important to us.
8 We believe that talking about quality, you must continue
9 the continuity of care. Also, reduce open and real
10 competition among health care providers and drive up the
11 costs of medical care, which is already too much for
12 Pennsylvanians to bear.
13 Although policymakers can honestly disagree on
14 how to fix parts of the health care system and the health
15 care costs as they rise, we believe and agree that health
16 care should not be financially driven, a winner-take-all
17 game for larger health care institutions, especially those
18 that claim to be charitable in purpose. Health care should
19 never be a win-or-lose game for patients or consumers. No
20 single health care entity should have the power to dictate
21 who has affordable access to medical services or have the
22 power to force consumers to switch the doctor or hospital
23 or insurance company they choose. This type of situation
24 is totally inappropriate, unethical, and puts the quality
25 of care at risk for patients and residents in these 109
1 communities. It currently exists in western Pennsylvania
2 and could seen begin to emerge elsewhere in the
3 Commonwealth. Large health systems that also employ
4 physicians should not compel them to act against the duty
5 to care for their patients. We believe that the physician-
6 patient relationship is one that should not be adjusted or
7 that executives, whether at an institution or an insurance
8 company, should have any control over.
9 As a health plan, Highmark believes individuals
10 and families should have choice in selecting their
11 hospital, their physician. They should have choice in
12 selecting what insurance company they’re going to use and
13 how they’re going to receive care. Our mission
14 historically has embraced these principles. For all these
15 reasons, we strongly urge this Committee to approve House
16 Bill 1621 and 1622 as a vital step to protect our consumers
17 and their choice. Those are what the bills are about.
18 It’s protecting consumer choice now and in the future.
19 This legislation will give Pennsylvania consumers and your
20 constituents a measure of security, certainty about how
21 their health care can be delivered and financed in the
22 future.
23 With that, w e ’re open to questions.
24 MAJORITY CHAIRMAN BAKER: Thank you very much.
25 We just ran out of time but we are going to allow a five- 110
1 minute time frame for some questions.
2 I'd like to recognize the Majority Leader, Mike
3 Turzai.
4 REPRESENTATIVE TURZAI: Dr. Winkenwerder, thank
5 you so much for being here today.
6 Real briefly, it's clear everybody here seeks
7 healthy competition amongst insurers and healthy
8 competition amongst providers. I think a key point that
9 needs to be made, and I'd like you to address it, is that
10 Highmark purchased West Penn Allegheny General, a health
11 system in Pennsylvania, western Pennsylvania, that was
12 having financial difficulties, thus allowing some
13 competition on the provider side. I think that's a crucial
14 factor that has to be in front of folks, and I'm for
15 competition on the insurance side and the health care side.
16 Tell us what was behind your decision-making and where
17 that's headed.
18 DR. WINKENWERDER: Thank you for that question,
19 Leader Turzai. It really was about ensuring that people
20 had choice. It was about ensuring that people had other
21 options other than a single monopoly-like system, and that
22 was very important, and I will say that the strategic
23 direction for that had been initiated prior to my arrival.
24 As you know, I came to my position in June of 2012, but as
25 a physician, as an executive, as someone who has been 111
1 involved with health care delivery for my entire career, I
2 believed it was very important to pursue that. I believe
3 that people need those choices. And we have received, of
4 course, a lot of support for that and we appreciate the
5 support of this legislature and Members of the legislature
6 when it was undergoing regulatory review.
7 So we would like to believe that there can be two
8 in our region or other regions large systems but to create
9 a sort of a totally exclusionary type of arrangement is not
10 in the public interest. It achieves some level of
11 competition but it’s not what we would call open
12 competition where people can choose, and it leads to a lot
13 of redundancy in creating and recreating things. One of
14 the speakers had spoken about if there’s expertise over
15 here but not over here, how do you get to that. Well, you
16 either get to it by paying an exorbitant price if it’s not
17 in your network or this network has to recreate it and it’s
18 duplicated, so that’s a waste of money.
19 But w e ’d like to believe that when you’ve got
20 large systems that are lots of hospitals and doctors and
21 health insurance mixed together, let those competitors
22 create their own tiered products where there’s something
23 that’s less expensive, you know, more than one product, and
24 that’s a great way to compete. So we would welcome that
25 concept, which is not part of what the bill directly 112
1 addressed but it would be a forcing function to that end.
2 MAJORITY CHAIRMAN BAKER: And lastly, just so I
3 understand where you’re coming from, am I accurate to say
4 you would oppose a closed IDN like Kaiser either you
5 creating one or UPMC creating one?
6 DR. WINKENWERDER: I worked for Kaiser
7 Permanente. I know how the system operates. What
8 differentiates that kind of system is that it is exclusive
9 to itself, and so if a system was willing to work only with
10 itself, and w e ’ve had examples of that probably at one
11 point in Pennsylvania. I don’t know if HealthAmerica was
12 ever. I know in other parts of the country they had the
13 old HMO model, a group or staff model where it was all part
14 of -- the insurer owned the providers and they were
15 exclusive to themselves. So philosophically, I don’t have
16 a problem with that but in the case of large systems like
17 ours, like some of the others w e ’ve talked about, we are
18 committed to be open. And to be clear, the Allegheny
19 Health Network is open to all insurers. We welcome all
20 insurers, Aetna, United, Cigna, all the national plans. We
21 just think everybody ought to play by that kind of same set
22 of rules and that gives the consumer, the individual, the
23 family more choice.
24 MAJORITY CHAIRMAN BAKER: Thank you very much for
25 your testimony, your answers. I appreciate it very much. 113
1 We are out of time and we need to move along. Thank you
2 very, very much.
3 DR. WINKENWERDER: Mr. Chairman, thank you.
4 MAJORITY CHAIRMAN BAKER: Last one before we
5 break for a brief period for lunch is Paula Bussard,
6 Hospital and Health Care Association of Pennsylvania.
7 Welcome.
8 MS. BUSSARD: Thank you.
9 MAJORITY CHAIRMAN BAKER: You may proceed.
10 MS. BUSSARD: Thank you, Chairman Baker, and
11 thank you, Chairman Fabrizio, for inviting us to talk today
12 about House Bill 1621 and 1622.
13 The Hospital and Healthsystem Association,
14 otherwise known as HAP, represents and advocates for the
15 nearly 240 acute and specialty hospitals and health systems
16 and their patients.
17 Let me say at the outset that we recognize the
18 State’s role in protecting public health and safety through
19 its oversight of health care practitioners and health care
20 facilities. We also recognize that the State has a
21 compelling public policy interest to ensure a competitive
22 health insurance market, and we recognize that a
23 competitive insurance market does enable employers and
24 subscribers to have competitive premiums and also fosters
25 competitive payments to health care providers. But at the 114
1 same time, we oppose legislation that would create a
2 regulatory framework that prevents health care providers
3 from effectively structuring contractual relationships with
4 health plans or unduly interferes with the market
5 competition fostering innovative approaches. It is for
6 those reasons that we do not support House Bill 1621 or
7 1622.
8 My written testimony that you have goes into
9 quite a lot of detail on the concerns we have in those
10 bills and others this morning have provided similar
11 comments, so I won't belabor those points at this time.
12 Rather, I'd like to touch on why HAP sees the
13 need for a thorough public dialog regarding the regulatory
14 framework for health care providers and health care
15 insurers and to determine whether it's sufficient and
16 appropriate as health care delivery and financing of health
17 care are changing rapidly.
18 We believe we need to look at current law and
19 regulations to make sure they are fostering a competitive
20 insurance market that enables broad access to health
21 coverage and we need to look at the oversight of health
22 care practitioners and health care facilities to make sure
23 we aren't siloed in what we do and that we are
24 appropriately delivering effective and quality health care,
25 and we need to talk about what the Commonwealth should do 115
1 to enable innovation and not hinder innovation. This year,
2 Chairman Baker, this Committee took leadership and passed
3 Act 60 of 2013, which updated the regulatory oversight for
4 hospitals, and earlier the Majority Leader raised a series
5 of types of questions to the Insurance Federation of should
6 these issues be on the table for discussion, and we would
7 say yes, they should. There are probably many other issues
8 that we all need to think about.
9 Fundamentally, the hospital community believes
10 that care integration should improve the effective delivery
11 of health care across the continuum of care. That’s
12 outpatient and primary care, that’s inpatient and post
13 acute and community based types of settings, and we want to
14 make sure that laws do not impede that delivery and access
15 to care for Pennsylvanians.
16 The areas that we feel pretty strongly about as
17 we look at accountability is accountability both for the
18 delivery of care as well as the financing or payment of
19 care, and so that accountability and transparency is needed
20 not only in health care deliver and pricing for health care
21 delivery but it’s needed in the financing of care and
22 health insurance. Standards need to be equitable. We need
23 to have level playing fields so that we are creating
24 opportunity to foster innovation. Keep in mind there are
25 types of health care that no one competes to offer that are 116
1 fundamentally obligations of acute-care hospitals and
2 serving those without insurance, those needing burn,
3 trauma, obstetrics, inpatient psychiatric care. We need to
4 make sure that communities in Pennsylvania have appropriate
5 access to health care.
6 There has to be this balance between market force
7 and regulation. We understand when there's something
8 distressing that we want to do something but tipping the
9 balance one way or the other does not enable innovation and
10 progressive improvement in delivering or financing, and we
11 do believe in public reporting or transparency. Hospitals
12 have been subject to public reporting since the mid-1980s,
13 and this year, the legislation for the Pennsylvania Health
14 Care Cost Containment Council is up for reauthorization,
15 and we support that. But we fully recognize that we are
16 not the only locus of health care delivery, and our quality
17 isn't the only transparency that is needed.
18 There needs to be better data in the public
19 domain for policymakers, for subscribers, for employers,
20 for regulators, for practitioners related to other health
21 care facilities and related to health insurance.
22 Ultimately, we believe that fair competition is
23 essential to quality health care delivery. It enables
24 choice by consumers. It does foster innovation and
25 improvement in health care that is underway in a number of 117
1 areas of the State, and it is essential for this State and
2 indeed the country to advance medical practice and
3 technology to improve care and improve affordability. We
4 think these public discussions are important for patient
5 protection. We want to see that they are evidence-based,
6 consistently applied and do allow for flexibility in
7 responding to what is a very dynamic and rapidly changing
8 environment.
9 Appropriately structuring the state oversight for
10 facilities, for practitioners, for health insurance will be
11 in the best interest of Pennsylvanians, and we welcome more
12 substantive dialog in that regard.
13 And I would be happy to answer any questions you
14 may have before you break for lunch.
15 MAJORITY CHAIRMAN BAKER: Thank you very much for
16 your brief testimony, and we do have time for questions.
17 Representative Schlossberg.
18 Oh, by the way, I ’d like to recognize the
19 presence, I believe Senator Vulakovich was here. Is he
20 still here? Yes, he is.
21 Representative Barbin, is he still here? No,
22 he’s left. Okay. Thank you.
23 Representative Schlossberg.
24 REPRESENTATIVE SCHLOSSBERG: Thank you, Mr.
25 Chairman. 118
1 Thank you, Paula, for your testimony. There is a
2 general consensus in this room from everybody who has
3 testified that we need to do something, that something has
4 to be done in this and in regards to health insurance
5 access and cost containment in general. Opponents of this
6 legislation, yourself included, have said that this is a
7 conversation worth having but we need to do something
8 bigger. A pretty commonly held expression in politics is
9 that the good shouldn’t be the enemy of perfect -- or
10 perfect shouldn’t be the enemy of good. So I guess my
11 question is, why are we trying to push this to a broader
12 conversation when we all acknowledge that a problem exists
13 and we have a potential solution?
14 MS. BUSSARD: Well, we would suggest that the
15 solution would create unintended consequences, which a lot
16 of other speakers have alluded to this morning, in that it
17 is a one-sided approach to addressing a problem. It gives
18 a leverage to one party. That balance that strikes between
19 providers contracting and insurers assuring adequacy of
20 network and affordability is essential.
21 Keep in mind that approximately a third of this
22 State’s hospitals have negative total margins, meaning they
23 are very stressed in their financing of care, and so
24 creating a dynamic that is more one-sided than not we don’t
25 believe really solves the problem and will only create 119
1 other problems as the Commonwealth would proceed.
2 MAJORITY CHAIRMAN BAKER: I’d like to recognize
3 Adam Harris. Representative Harris has entered the room.
4 Other questions? Representative DeLissio.
5 REPRESENTATIVE DELISSIO: I hope you can take a
6 stab at this. W e ’ve heard about pricing, affordability,
7 costs. Does anyone determine what is an appropriate and
8 allowable cost in this equation, or who determines what is
9 an appropriate and allowable cost in this equation?
10 MS. BUSSARD: Okay. In the equation of paying
11 for health care, the payers determine what’s an appropriate
12 and allowable cost. Rules are set by Medicare, rules are
13 set by Medicaid, and through contracts, health insurers
14 establish those accountabilities, and so how you or I might
15 look at a cost of something, there are series and pages and
16 pages of rules that determine what’s allowable, what’s
17 appropriate.
18 REPRESENTATIVE DELISSIO: You mentioned Medicaid
19 and Medicare. I ’m actually a little familiar with those
20 costs that are allowable in those arenas. What about the
21 non-Medicaid and non-Medicare arena? Because they’re the
22 arenas w e ’re talking about here today.
23 MS. BUSSARD: Those rules are set in the
24 contracts between insurers, the Blue Cross, the Aetnas, the
25 Geisingers, the UPMC health plan and the providers. 120
1 REPRESENTATIVE DELISSIO: So they're between the
2 parties, if you will?
3 MS. BUSSARD: They're contractual. You need to
4 -- how you bill, what defines medically appropriate, the
5 process of utilization review, observation versus
6 inpatient, those are set through contracts.
7 REPRESENTATIVE DELISSIO: And one of my concerns
8 is, because generally I think a company does, this is the
9 cost, this is the margin I need or want to make, and that
10 translates to my price. I'm not sure health care works at
11 all that way. I think we back into it, and we get to it in
12 a variety of ways, and the cost is the driver. So somebody
13 who has an aggressive public relations, marketing,
14 admission kind of campaign has a higher cost than one area.
15 My concern is how those are done. So if it's between the
16 payer and the provider, then you've answered my question.
17 Thank you.
18 MAJORITY CHAIRMAN BAKER: Representative
19 Christiana.
20 REPRESENTATIVE CHRISTIANA: Thank you, Mr.
21 Chairman, and thank you for your testimony.
22 The point of the legislation, if I could just use
23 an analogy, and I'm going to use specifics. A 35-year-old
24 mother of two has gone to her OB/GYN for 10 years,
25 independent practitioner. Under this market, she gets 121
1 pregnant for a third time and she goes to her doctor, no
2 longer independent, good change that they were bought out
3 by a major hospital system. House Bill 1622 would say that
4 in spite of the fact she has Highmark insurance and now
5 this doctor’s a UPMC employee, she wouldn’t lose access to
6 that physician. Without this, though, and these contracts
7 set to expire, Paula, it’s pretty safe to say that she
8 would be forced to sever that relationship with that doctor
9 if it’s an employee, right?
10 MS. BUSSARD: Okay. You’ve got a lot into that
11 question.
12 REPRESENTATIVE CHRISTIANA: I tried to use a
13 hypothetical because it’s pretty safe.
14 MS. BUSSARD: You know, it’s a hypothetical. I
15 mean, let’s start with obstetrics and physician practice
16 acquisition as a lot of that evolving as this State
17 grappled with medical liability. Had hospitals not
18 supported acquisition of obstetric practices, we would see
19 far fewer than the 97 obstetric units that we are down to
20 in the State. But that said, practitioners prior to
21 acquisition could choose to be participating or not. Over
22 the course of my employment with employer coverage, I have
23 had independent practitioners who have chosen not to
24 contract and have had to make those decisions.
25 Those decisions are tough, and that’s one of the 122
1 areas of what’s an adequate network, what’s adequate in
2 terms of disclosure to individuals about who’s
3 participating or not that we need to have a balanced
4 conversation between practitioners, the insurers,
5 facilities and the regulators. The analogy you present,
6 you know, the individual might have to choose another
7 source of care.
8 REPRESENTATIVE CHRISTIANA: As a couple of
9 testifiers have alluded to, this bill is only directed
10 towards IDNs and it’s not directed at all hospitals, but in
11 my opinion, the community hospital that I’m very proud of
12 in Beaver County isn’t trying to restrict access for
13 certain insurers, almost driving out customers to shift
14 market forces. How many of your participants aren’t
15 willing to contract with insurers? We heard from
16 Geisinger, an integrated delivery network that contracts
17 with everyone. It’s my impression that most of your
18 community hospitals aren’t interested in driving away
19 customers, they’re willing to accept everyone. So this
20 apples-and-oranges argument that this only is a targeted
21 approach, we should be doing it for everyone, I would just
22 ask you, unless I ’m wrong, most community hospitals aren’t
23 pushing away patients and denying access.
24 MS. BUSSARD: There are lots of variabilities in
25 how providers and health insurers contract, and I would 123
1 tell you as a trade association, w e ’re not privy to those
2 contractual terms because they’re proprietary. They’re
3 negotiated. So I couldn’t really give you clear statistics
4 on the practices in those ways.
5 What our concern is in the bills, Representative,
6 is that they are saying an insurer could force a network to
7 do something. At the same time, there’s no requirements
8 back to the insurer. And that’s what happens when you get
9 into any willing insurer or any willing provider. You are
10 really inserting into what should be a negotiated
11 contractual practice. We have to then look at other State
12 laws around antitrust, around unfair insurance practice to
13 see if the parameters, to make sure that that balance is
14 there are working. If they’re not working, then we should
15 be addressing through those parameters.
16 REPRESENTATIVE CHRISTIANA: You may or may not be
17 right but I don’t think any of those solutions solves the
18 problem of severing relationships between patients and
19 doctors, which is the point of the bill.
20 Thank you, Mr. Chairman.
21 MAJORITY CHAIRMAN BAKER: We have two minutes
22 before a 30-minute break. Everyone’s been patient sitting
23 for three hours, so Representative Frankel, you have the
24 last question.
25 REPRESENTATIVE FRANKEL: Thank you. Thank you, 124
1 Paula.
2 You talk about this legislation giving leverage
3 to one party. I mean, I just don’t see that. I mean, we
4 have a problem in western Pennsylvania that involves two
5 big systems at the end of the day, but ultimately what
6 w e ’re trying to do is give leverage to consumers because
7 right now provider leverage, which is what w e ’re seeing in
8 western Pennsylvania and other parts of the country -- and
9 we ’re not talking about small community hospitals -- it’s
10 dictating the underlying cost. It’s not insurance
11 companies.
12 So what w e ’re trying to do is not give leverage
13 to one insurer, w e ’re trying to replicate the competition
14 that we now are going to have in insurance company
15 competition between providers, and I think ultimately that
16 the tiered products that this legislation would allow
17 provide the opportunity to have real competition provider
18 to provider, and that is what’s going to lower the cost of
19 health care. Right now, we don’t have that type of
20 competition, and these types of silos that are going to be
21 created if we don’t adopt this legislation are something
22 else like it is going to perpetuate an absolute exorbitant
23 inflation in the cost of health care. It’s not our
24 community hospitals who I think would actually benefit from
25 this legislation, quite frankly. I think it would help 125
1 salvage them and keep them maybe independent and enforce
2 the fact that they take all providers and reward real low-
3 cost, high-value providers. This would be good for
4 community hospitals. It is not good for large health care
5 systems that want to be able to dictate price.
6 So I'd like your comments on that, but I think
7 that this is not trying to benefit anybody but consumers
8 and lower health care costs, create competition, both in
9 insurance and for providers. That is the best recipe for
10 high value, good outcomes, low cost, provider and insurance
11 company competition.
12 MS. BUSSARD: Representative, I think we have the
13 same goals but I think we do see different paths of trying
14 to achieve those goals. Any time a provider regardless of
15 its complexity has to accept a default type of agreement,
16 that is leverage to one party, and we've seen that at times
17 with various payers.
18 REPRESENTATIVE FRANKEL: I think it's leverage to
19 get a deal done at the end of the day. The default issue
20 is just a mechanism to kind of get to this. It's not the
21 solution. It's just the mechanism to try and get everybody
22 to achieve this competitive environment I'm talking about.
23 MS. BUSSARD: And I appreciate that concern. The
24 hospital community very broadly -- our positions are
25 developed by our broad membership -- does not see it that 126
1 way.
2 REPRESENTATIVE FRANKEL: Thank you.
3 MAJORITY CHAIRMAN BAKER: Thank you very, very
4 much for your testimony on behalf of the Hospital
5 Association of Pennsylvania. We appreciate your time.
6 We will take a 30-minute break for lunch, and we
7 will resume at 12:30, a 30-minute break.
8 (A break was taken.)
9 MAJORITY CHAIRMAN BAKER: That lunch break did
10 help reenergize me. That was great.
11 We have with us Dr. Brad Klein, Abington
12 Neurological Associates. Dr. Klein, nice to have you with
13 us. You may proceed, sir.
14 DR. KLEIN: It’s a pleasure. Thank you so much.
15 My name is Dr. Brad Klein. I ’m a specialist in
16 Abington, Pennsylvania, northeast of Philadelphia. I ’m a
17 specialist in neurology, so I take care of patients with
18 headache disorders, strokes, multiple sclerosis,
19 Parkinson’s disease. I’m actually in an eight-physician
20 neurology practice and also direct the Abington Headache
21 Center.
22 Now, I ’m representing myself and my practice.
23 I’m not representing any other organization. But I can
24 tell you that after communicating my thoughts to a number
25 of other private practitioners across the area, independent 127
1 of any system, everyone has supported what I ’m saying to
2 you today.
3 So now I ’m testifying against House Bill 1621 and
4 1622 as they are presently written. House Bill 1621 and
5 1622 should not be adopted as introduced, at least, because
6 these bills will worsen patient access to physicians and
7 reduce the partnership between the insurance carriers and
8 the provider community within our community, and my hope is
9 that this testimony expands your understanding and perhaps
10 the history and the present-day problems challenging this
11 relationship between physicians and insurers and perhaps
12 some of the reasons that maybe integrated delivery systems
13 are actually being created. My additional hope is that you
14 can appreciate the need for further transparency by the
15 insurers before you decide to legislate all these
16 integrated delivery systems.
17 Now, Pennsylvania has only a few significant
18 commercial insurance carriers. In southeast Pennsylvania
19 where I practice, we face an oligopoly. According to the
20 AMA 2013 study of insurance markets, IBC, Independence Blue
21 Cross, controls 58 percent of the metropolitan statistical
22 area, and Aetna controls 30 percent. That’s 88 percent
23 between two insurers alone from a commercial standpoint.
24 Now, given IBC’s market dominance, for instance, they can
25 unilaterally determine premium rates to patients, 128
1 reimbursement rates to physicians and ultimately make
2 patient care decisions with or without physician
3 involvement.
4 Now, as a physician, as you can imagine, I ’m sure
5 you’ve heard from other physicians in the community, our
6 practice expenses continue to escalate. The Medical Group
7 Management Association, which is an organization nationally
8 that helps practices try and be efficient and figure out
9 how to manage their finances, demonstrated that the cost to
10 transition to ICD-10 by October of 2014 will cost a
11 practice of my size $285,000. ICD-10 is a new coding
12 system that will be required by all of us across the
13 country to assess a coding for the diagnosis that we deal
14 with.
15 Of course, as you can imagine, there are other
16 costs. Employee health coverage as a small business
17 employer, in two years I had a 33 percent escalation in
18 premiums. Technology costs for my electronic medical
19 records system including servers, the cost of actually have
20 a technician onboard and available to me, compliance
21 issues, HIPAA issues, malpractice issues and increasing
22 rent, to name a few, and arguably, my staff once in a while
23 wants a raise as well. There are endless and needless
24 arguments with insurers as well, authorizations for
25 medications and diagnostics including imagine, and frankly, 129
1 this can take us hours to get one drug authorized for a
2 particular patient or even some imaging done, depending on
3 the circumstances. If you don't believe me, a study
4 published demonstrated the total annual cost of interacting
5 with a health plan could be $68,000 per physician per year.
6 Providers are also routinely not paid for care
7 and services provided for months and years after treatment,
8 and I'd be happy to give you examples offline or if you
9 want to ask me about that later on, I'm happy to explain
10 that further.
11 Now, like any expanding organization, the larger
12 the insurer, the more errors and administrative
13 bureaucratic burden that can be created, so who is
14 responsible for the cost of dealing with this additional
15 administrative burden that's non-clinical time? Now, in
16 our opinion, as we understand it, on average, commercial
17 insurers in Pennsylvania pay providers less than other
18 States. We have tried to recruit physicians for years into
19 our practice. Unless you have family ties to our area, you
20 do not come to Pennsylvania and you certainly don't come to
21 our area. The only reason I'm here in this State is
22 because of my family ties. Now, I've got a community that
23 I serve and I love them dearly, which is another reason why
24 I am staying now, but when I first started practice, I
25 really didn't want to be here. I wanted to be somewhere 130
1 else. The loss of physicians is in no small part due to
2 poor reimbursement rates.
3 Now, there are other independent organizations
4 that do exist to assess physician rates across the country.
5 I have included that in the written testimony for your
6 perusal, and apparently, according to those organizations,
7 the reimbursement rates are higher or should be higher
8 within Pennsylvania, and they’re not. As a member of Blue
9 Cross of Illinois, I actually have access to what my
10 physician rate should be for what I do, and that is also
11 demonstrated much higher than what I am physically paid as
12 a physician.
13 Now, the Pennsylvania workforce is also aging.
14 Fifty-five percent of Pennsylvania physicians are greater
15 than the age of 50 years old, and less than 9 percent of
16 physicians are under the age of 35. Only 40 percent of
17 trainees stay compared to a 1992 survey demonstrating that
18 60 percent of physicians were staying. We are one of the
19 oldest States in the country, and as you can imagine, older
20 people do use higher percent of medical services. So our
21 demand is growing and not shrinking.
22 So how will these bills effectively forcing
23 providers into accepting insurer rates potentially with a
24 clear and transparent process be helpful to the
25 Commonwealth? Physician choices are limited, as you can 131
1 imagine, what to do with our finances in these kinds of
2 circumstances. We can try to negotiate directly with
3 insurers, see patients faster without hopefully risking
4 quality or safety, leave the State and practice elsewhere,
5 change careers, retire early or become employed by larger
6 health systems for the hope of more reasonable
7 reimbursement rates.
8 Now, it is extremely challenging to negotiate as
9 a private practitioner with an insurance carrier. Most
10 physicians are not business trained, and their skill sets
11 reside in medicine and not business, specifically, not in
12 negotiations. Most physicians went to medicine to take
13 care of the patients at the bedside, not to do these
14 negotiations. It is not inherent in their training to run
15 a business or negotiate contracts, and so you can see that
16 there’s an immediate disadvantage to us, and would you
17 prefer us to be trained in business or would you prefer us
18 to be trained in the clinical care of patients?
19 So physicians’ knowledge of our rates across this
20 State are very restricted. By our contracts with our
21 insurers, they require us to not allow us to discuss rates
22 with anyone across anywhere, so we can’t discuss anything
23 with anybody. However, the insurers have thousands of
24 physicians and practice rates that they’re aware of and so
25 they have their own benchmarks to work off to do 132
1 negotiations, and as you can imagine, there's only a few
2 insurers, so we don't have much learning in terms of
3 working with insurers to negotiate whereas the insurer may
4 have had hundreds or thousands of prior negotiations so
5 we're at an extreme disadvantage if we wish to try to
6 remain independent providers.
7 Now, if you can imagine a community of 75
8 physician practices and two insurers hypothetically, and
9 let's say one of those 75 physician practices decides that
10 the cost of providing care to their patients is not
11 feasible with this insurer, so the practice reaches out to
12 the insurer to ask for better reimbursement and the insurer
13 says no. Why should they say yes? The practice has
14 limited choices then. They could stop seeing patients.
15 However, those patients can move to the 75 or 74 other
16 practices and patients can easily shift providers. This
17 can result in a loss of upwards of 40 percent of patients
18 to that practice which could result easily in financial
19 collapse due to the dearth of patients remaining.
20 So as I hope you can see, the cards are truly
21 stacked against independent providers to address these rate
22 concerns. Pennsylvania insurers are well aware of these
23 facts and use this leverage against us and other providers
24 for decades. Now, there's even more challenges, though,
25 should the negotiations break down. Insurers' issues are 133
1 more subtle but have an enormous negative impact on
2 practice, so my practice personally evaluated the above
3 financial issues and asked Independence Blue Cross
4 specifically to assist us through improved rates. We asked
5 them to help us cover our costs better, maintain the high
6 quality we believe is important and bring more neurologists
7 to the community because there is a death of neurologists.
8 In my practice, even despite losing IBC, I have a three-
9 month wait list just to get a patient in. I know other
10 practices I ’d be happy to tell you about where they see
11 patients in the consult service and they can’t get their
12 patients in to see them outpatient at all for weeks,
13 months, even if they’re seizing. IBC unfortunately
14 declined and put us in a precarious position. We could
15 choose to try and survive without IBC or join a larger
16 system to try to secure more reasonable reimbursement rates
17 for what we do, and as you can imagine, though, this
18 creates a paradox in my mind, and as I ’m sure you’re seeing
19 in this Committee now, the more physicians that join a
20 hospital system allows the system to grow in size and
21 power. Joining a system more effectively allows the
22 reimbursement rates to be negotiated even higher
23 potentially than when a small practice like ours would have
24 agreed to independently. Effectively the insurers are
25 encouraging us to merge into a larger system for our own 134
1 survival. In the long run, not offering a compromise to
2 independent groups clearly works against the insurer and
3 possibly the community served if the premiums are able to
4 escalate to compensate the higher reimbursement rates
5 obtained by the larger system versus the independent group.
6 It seems like the insurers such as the Blues are
7 encouraging providers to merge, become employed and develop
8 these integrated delivery systems as a result. So my
9 personal opinion, the insurers are making their own beds.
10 However, if House Bill 1621 and 1622 are enacted, the
11 insurers will not have to sleep in those beds that they
12 made.
13 Now, if you’ll humor me, I ’d like to give you
14 some examples of what happened to us with the breakdown
15 with Independence Blue Cross. So Independence Blue Cross
16 has an option called continuity of care. This is an
17 opportunity for patients who after we leave the network,
18 they have an additional brief period of three months to try
19 and go to another provider if they so choose. It gives
20 them that gap of time to do so. However, this opportunity
21 was not offered by IBC in the letter that they distributed
22 to 4,000 of our mutual patients and it was not offered to
23 any patient that called to complain about the situation.
24 It was only offered to those who called repeatedly or
25 loudly, and that’s how we learned about it to give to our 135
1 other patients. And to qualify for this, though, if the
2 patient signed off on it, we also had to agree to the same
3 terms and conditions of our prior contract, but apparently
4 this was not reciprocal in nature, so even though IBC
5 agreed to allow us to serve as participating providers, IBC
6 has yet to pay us for two-thirds of these claims now dating
7 back to the beginning of August. Now, this approach, if
8 you're familiar, deviates from Pennsylvania Act 68 whereby
9 prompt payment of claims are required within 40 days of
10 receipt. Now, you can imagine the thousands of dollars
11 that IBC has unexpectedly not paid us, which placed our
12 practice at financial risk and directly increases the
13 pressure on us to agree to IBC's terms without argument.
14 You can make the argument, maybe perhaps IBC made an error
15 not paying us. However, IBC's continuity-of-care option is
16 not a new concept and has been implemented by other
17 practices in the past.
18 Another issue is that IBC did not pay out-of
19 network providers for emergency services rendered when in
20 the hospital, so if I see an acute stroke, the patient does
21 not have a choice of which physician to see. I have to
22 take care of them. So dealing with other insurers, though,
23 for the same issue, they will reimburse directly for
24 emergency services; IBC will not. We asked them if the
25 patients could assign the benefits to us; IBC said no. 136
1 They said the obligation as a member is to remit the
2 payment. Now, what happens if the patient is now out of
3 the hospital recovering physically, recovering mentally
4 from the hospitalization and they get a bill from us that
5 could be small or large. That can create an emotional
6 concern to them, that could create a financial concern to
7 them, and they have to hope that IBC will pay in a timely
8 fashion to cover us. Now, interestingly enough, as w e ’ve
9 seen in other practices, it also puts us of course in more
10 financial risk because w e ’ve learned that patients do not
11 pay for the service, they do not reimburse us for whatever
12 reasons.
13 There’s also apparently a relationship that we’ve
14 learned about between Highmark and IBC. Now, supposedly,
15 that has resolved and gone now but let me tell you about
16 one of the examples that w e ’ve had to deal with and all the
17 practices before us have had to deal with that have done
18 this is that when we separated from IBC, all PPO patients
19 became again in network through Highmark’s usual and
20 customary rate program, also known as its traditional
21 program. Unfortunately, this program is not a clear
22 improvement on IBC’s program and we were required to
23 terminate this UCR program affecting those patients that
24 had nothing to do with IBC. So as you can imagine, there’s
25 a fair amount of confusion and conversations that occur 137
1 between us and our patients and even our own staff to
2 decipher these nuances and to the best of my ability still
3 I can’t figure how that plays into my contracts.
4 So I think it seems wrong, in my opinion, that
5 the decision to leave one insurer should affect patients as
6 well as us with another insurer, and these are examples of
7 only a few of the complexities that w e ’ve learned firsthand
8 when trying to deal with a partnership with IBC. There’s
9 more examples I ’d be happy to give you as well,
10 unfortunately.
11 So as I hope you can see, if we don’t work in a
12 system and if we are as an independent practice not large
13 enough to have clout, we have limited options, limited
14 knowledge, limited resources and limited finance to ever
15 actively disagree with an insurer in terms of reimbursement
16 rates. Even after separating, our patients’ risk and
17 stress can extend much farther than the cost associated
18 with seeing fewer patients per day. A few thousand dollars
19 to an insurer is less than a drop in the bucket but it can
20 be devastating to a provider. It’s no one wonder that
21 physicians need to look into merging or becoming employed
22 into a larger organization if they wish to remain in the
23 area and practice medicine.
24 I believe that personally the Blues have
25 contributed to the development of these integrated delivery 138
1 systems and these integrated delivery systems are not
2 necessarily to develop the upper hand but to balance the
3 conversation and attempt reasonable partnerships, and I
4 believe Highmark leadership has helped build this bed but
5 now they don’t want to sleep in it. What’s worse is the
6 same philosophy is occurring across the State with other
7 insurers such as IBC. Not willing to partner as
8 independent providers providing reasonable competitive
9 rates is forcing us to consider merging into large
10 organizations, which may actually increase the risk of
11 demands on the insurers ultimately, which increases the
12 risk to patients. At the end of the day, the true victims
13 of the problem are your patients, your constituents.
14 I think we are at an apex of an outdated health
15 care system. The rules of supply-and-demand economics do
16 not function properly in the health care market. We need
17 to change how the health care system is delivered but these
18 bills unfortunately do not address that problem well. They
19 only perpetuate and accentuate, in my opinion, some of the
20 flaws in our existing system and continue to encourage the
21 exodus of high-quality physicians out of Pennsylvania,
22 leaving patients with even less options than we had before.
23 In my world, neurology is one of those examples
24 where there’s just not enough of us. Now, IBC would argue
25 with me on that, but I can tell you that the wait lists are 139
1 extensive. So truly looking to transform health care then
2 requires a different model, in my opinion. Legislation
3 against integrated delivery systems should be balanced with
4 appropriate legislative and public oversight of insurers
5 equally, perhaps more so for those who are deemed not-for-
6 profit status. A Blue Cross/Blue Shield company should not
7 able to generate market shares of 58 percent on their own
8 rights. Unfortunately, I'm not aware of any legislation
9 that prevents either insurer monopolies or oligopolies in
10 our State to protect patients or consumers. We need
11 legislation that promotes transparency in the marketplace
12 and encourages open discourse. Of note, reimbursement
13 transparency is supported by the Pennsylvania Medical
14 Society, and I'd be happy to share my rates with anyone in
15 this room if I was allowed to legally. It could only
16 benefit the Commonwealth to halt this legislation and start
17 over or amend this legislation with the understanding that
18 transparency is a better foundation to change the system.
19 The notion that Highmark, for instance, provides
20 usual and customary rates is not reasonable. It is never
21 explained to the public and is not fair to the community.
22 I have no idea what it means to be usual, and I have no
23 idea what it means to be customary, and to the best of my
24 abilities, I can't figure that out, and no one will tell
25 me. And further, as far as I'm concerned, from these other 140
1 independent organizations, it is neither usual nor
2 customary.
3 So in conclusion, I want to thank the Members of
4 this Committee for learning more about the state of our
5 health care system and the challenges of balancing health
6 care and cost and determining the best way to maintain high
7 access to high-quality providers across the states. Again,
8 I am against House Bill 1621 and 1622 as they are currently
9 written but I’d be happy to work with you independently or
10 whatnot to help further development of a more balanced
11 approach to address the problems within our system. Thank
12 you.
13 MAJORITY CHAIRMAN BAKER: Thank you very much,
14 Doctor, for your testimony. It means a lot to hear from
15 the medical community, especially a specialist such as
16 yourself in tertiary care delivery. Your opinion, your
17 suggestions, your observations are very valuable and we
18 appreciate that, and for taking the time out of your
19 practice to present testimony today.
20 I would like to, before we have one or two
21 questions, because w e ’re already running a little late,
22 recognize Representative Saccone, who is present with us,
23 and also Representative English, who is also here, Majority
24 Leader Turzai returning.
25 A very quick question, and I know it’s unrelated 141
1 to your testimony, I can’t help but ask it, though, what’s
2 your opinion of removing the restrictive covenants from
3 physician contracts such as non-compete?
4 DR. KLEIN: I think that part of the bill is an
5 excellent idea. You know, certainly in the Philadelphia
6 market, you’ve got four major academic centers. God forbid
7 there’s a restrictive covenant that says you’ve got a five-
8 mile radius that basically blocks your ability to be an
9 academic center at all in the city. You’d have to leave
10 and potentially move. It’s very destructive potentially.
11 So I do support that option.
12 MAJORITY CHAIRMAN BAKER: I recently heard from
13 an individual that related to me that a highly trained,
14 highly skilled tertiary care specialist because of this
15 restrictive covenant is basically sitting at home for the
16 next 12 months. I just think of all the wasted talent and
17 resources and training and the ability to help people.
18 It’s an issue I think we need to explore further.
19 DR. KLEIN: I do support that, absolutely.
20 MAJORITY CHAIRMAN BAKER: Thank you, Doctor.
21 DR. KLEIN: Thank you.
22 MAJORITY CHAIRMAN BAKER: One or two questions
23 very quickly, please.
24 Seeing none, thank you very much, Doctor. Was
25 there one? 142
1 Representative Frankel.
2 REPRESENTATIVE FRANKEL: Just very quickly. I
3 agree with you, and very thoughtful testimony, and I
4 understand where you're coming from. The transparency
5 issue is absolutely critical. We have no clue. We've seen
6 the articles in Time magazine, the bitter pill article, the
7 article in the New York Times a week ago with respect to
8 the costs of a stitch exceeding $500. There's no logic,
9 rhyme or reason, and one of the things that has always kind
10 of occurred to me with the issue of the acquisition of
11 physician practices by health care systems is that
12 automatically you go from being a doctor's office billing
13 basis to an outpatient facility and the health care system
14 is now being reimbursed at three to four times what you
15 were being reimbursed for the same procedure even though
16 you're in the same location, the same personnel and the
17 same equipment. Maybe there'd be a couple bells and
18 whistles on it but there's just no rhyme or reason why
19 you're at that low billing basis and just selling to the
20 health care system increases their reimbursement, you know,
21 three to four times, and I understand that Medicare allows
22 this and this is not one health care system. I mean, this
23 is just a real anomaly in the equation that's increasing
24 our health care costs. So if you want to comment?
25 DR. KLEIN: I would love to. Actually I'm glad 143
1 that you asked me that question because I ’ve been itching
2 to say this out loud.
3 So we were on ABC recently, and IBC stated that
4 our rates are completely reasonable. We learned through
5 what’s called the EOB, the explanation of benefits -- it’s
6 a bill that a patient can get, and it demonstrates
7 potentially what the reimbursement rate actually is, what
8 the negotiated rate is between the physician and the
9 insurance carrier. So one of our family members had to go
10 down to Philadelphia for whatever, a visit, to another
11 neurology colleague with the same level of education and
12 training and experience, and that reimbursement rate was
13 over 200 percent of my rate. So somehow with that level of
14 clout, for the same visit code that I would do, that person
15 -- now, it wasn’t going to the person, it was going to the
16 system, I ’m sure, but that rate was so exponentially
17 escalated, it was absurd to us. Yet they are willing to
18 say to the public out loud that w e ’re getting paid
19 reimbursement rates for the community; w e ’re all equal.
20 It’s not the truth.
21 REPRESENTATIVE FRANKEL: Thank you.
22 MAJORITY CHAIRMAN BAKER: Thank you, Doctor. We
23 appreciate your testimony.
24 Next we have Diane Holder, UPMC Health Plan, and
25 Tom McGough, Vice President and Chief Legal Officer for 144
1 UPMC.
2 MS. HOLDER: Good afternoon.
3 MAJORITY CHAIRMAN BAKER: Good afternoon.
4 MS. HOLDER: I ’m Diane Holder, and I am President
5 of the UPMC Insurance Services and the CEO of the UPMC
6 Health Plan, and I have submitted a longer testimony but I
7 will summarize it here today.
8 I want to thank you for the opportunity to speak
9 to the Committee. We are sharing your goal of trying to
10 find a way to keep health care affordable in Pennsylvania.
11 I thought I would tell you just a little bit
12 about UPMC’s insurance division because I think that’s been
13 part of the conversation today about why do people have
14 integrated delivery systems and what difference can they
15 make. About 15 years ago, we decided to form an insurance
16 company. It was in the context of a time in our market in
17 western Pennsylvania where narrow networks were being
18 formed. There was a network formed that excluded the UPMC
19 hospitals and there was also activity, as you heard from an
20 earlier testifier, of the large Blue plan in our market
21 beginning to buy insurance primary care practices. So as
22 an academic medical center with a variety of physicians and
23 community hospitals, in looking across the country at some
24 of the other things that provider systems have begun to do,
25 looking at Geisinger to our east and some other folks, we 145
1 decided that it would be a good thing for us to begin to
2 think about how do you bring the payer and the provider
3 strategy together, and it was a little bit defensive in the
4 beginning but what we decided to do was to try to really
5 build an opportunity to be an alternative in our market.
6 So we basically built a company that provides care for
7 people who have commercial insurance, for Medicaid,
8 Medicare, children’s health insurance and a variety of
9 other services and products including workers’
10 compensation, disability, health and wellness, and we have
11 been fortunate over the years to grow, and across all our
12 services and products today, we serve a little over two
13 million members primarily in Pennsylvania.
14 But before we decided to launch this insurance
15 division, we knew that we were going to have to do
16 something that was different and unique. We knew that we
17 were not going to be able to compete on price alone because
18 clearly we did not have the kind of reserves and we didn’t
19 have the market share. At that point most people in
20 western Pennsylvania really only had one choice. About
21 two-thirds of people were receiving their care through one
22 insurance provider.
23 So we decided to basically begin a process that
24 focused very heavily on customer service and on quality,
25 and in addition to affordability, we set those as our 146
1 highest priorities, and over 15 years we've been really
2 able to achieve many of those goals. This year we were
3 recognized as the number one HMO and PPO in the State of
4 Pennsylvania. We have been in the Medicaid market for nine
5 of the last ten years. We have been the number one in
6 quality in the Medicaid plans of all plans in the State.
7 There are seven of them offering Medicaid managed care.
8 Our Medicare plan is a four-star plan, which means it
9 performs very well against most other plans in the nation.
10 Our behavioral health company has been recognized as a
11 leader in quality and innovation. In fact, just yesterday
12 we learned of a second federal grant that we're getting
13 from the Centers for Medicare and Medicaid for their
14 innovation center because we have been working very hard
15 the last several years to develop rural health homes for
16 people with serious and persistent mental illness, and now
17 with a Federal innovation grant, we're going to be allowed
18 to scale that work to many, many counties in Pennsylvania,
19 which we think is really a very good thing.
20 We have also focused a lot on customers, really
21 trying to figure out how do you make sure that people have
22 a high-touch service, and we have been recognized. We were
23 actually recognized as the number one large call center in
24 the global call center and in the nation really. Prior
25 winners of that were American Express and Wells Fargo. But 147
1 all of that is related to trying to make sure that when
2 somebody calls you or when you need outreach to them,
3 you’re basically trying to facilitate their care to make
4 insurance less confusing, to try to get the maze of health
5 care, which really confuses a lot of people in terms of how
6 do they get the services they need.
7 When we started, we put our doctors together, our
8 insurance experts together and our hospital leadership
9 together and we basically said, you know, part of what we
10 need to do is to figure out how do you help people and
11 facilitate the care, how do you not let an insurer be a
12 barrier but at the same time be a good fiduciary, and so we
13 basically did things like tried to take the waste out, so
14 we sat together for months on end trying to figure out how
15 do you get rid of all this noise. The doctor says yes, the
16 insurance company says no. How do you actually make sure
17 that you’ve got the right protocol so that you don’t have
18 to second-guess all the time of what needs to happen?
19 So w e ’ve worked very hard on that, and w e ’ve done
20 a lot of different things including trying to build
21 clinical protocols together with our doctors. We spent the
22 last 10 years building many of those. One of the things I
23 was very proud of is that we were the only insurer and
24 eventually others followed that we didn’t actually put
25 OxyContin on our formulary, and the reason that was 148
1 important was because actually it was the fastest growing
2 addictive drug in the State, and what we did is, we worked
3 with all of our pain specialists, and for the patients that
4 truly needed it, we found a way for the pain specialists to
5 help them get that medication, but for other people, we
6 actually found alternatives, and that saves people money,
7 it improves quality and it is just better for the consumer.
8 We have thousands of examples like that, and I think that’s
9 part of why when people say what does an integrated
10 delivery system do, what they do is, they get in a room
11 together and they try to figure those things out. They put
12 their doctors and their hospital executives and the rest of
13 the people together and they say what makes sense from both
14 a cost and a quality perspective.
15 So I ’m proud of the fact that we were the first
16 people in our market to build patient-centered medical
17 homes years ago to build specialty medical homes, to create
18 a doula program for high-risk pregnant women who were
19 basically going into pre-term labor and not having the
20 social supports that they need, and I think we were one of
21 two health plans in the nation paying for that kind of
22 service.
23 So I could go on, and I don’t mean to be an
24 advertisement for what w e ’re doing but I do think it’s
25 important as you’re trying to decide what matters to people 149
1 and how should health care be delivered and how should it
2 be financed to really try to understand a little bit about
3 what we think is of value here and why we're fighting so
4 hard in so many ways to protect what we think we bring to
5 the consumer and what we think matters in health care.
6 We think that increased competition has been a
7 very good thing in our market. You know, we were really
8 the only major competitor to Highmark for the last many
9 years. The UPMC system contracted several years ago with
10 many of the large nationals -- Cigna, United, Aetna -- and
11 I run the insurance side but, you know, I think competition
12 makes us all better and we welcome those competitors into
13 our market. We think that the changes that are happening
14 with the employers as we speak, we're seeing a lot of
15 movement. We as a health plan have seen a lot of movement
16 as have the other national companies, and so from our point
17 of view, market competition is working and we think it
18 would be important to continue to let it work.
19 So basically what I'm asking today really is to
20 look at what the free hand of competition can do, look at
21 what's happening in the market, look at the changes that
22 are already happening and not to put a bill into place
23 which we think tries to freeze Pennsylvania methodology in
24 place, that gets in the way of potential innovation and it
25 really will be very difficult in terms of the kinds of 150
1 competition that we see evolving now, and very
2 respectfully, I hope that you will be able to hear some of
3 our points today and take those into consideration as you
4 try to make some further decisions. Thank you.
5 MAJORITY CHAIRMAN BAKER: Thank you, Diane, for
6 your testimony.
7 Tom?
8 MR. MCGOUGH: Thank you. Good afternoon, Mr.
9 Chairman and Committee. I ’m Tom McGough, Senior Vice
10 President and Chief Legal Officer of UPMC. I also have
11 submitted a longer written statement, and I ’ll just
12 summarize today.
13 UPMC’s mission is to serve our communities by
14 providing outstanding patient care and to shape tomorrow’s
15 health system through clinical and technological
16 innovation, research and education. In pursuit of that
17 mission, UPMC has become the provider of choice in western
18 Pennsylvania, and it’s done that in the face over the years
19 of competition. There was an organization known as AHERF
20 -- some of the panel may recall it -- in the 1990s that was
21 quite a competitor in the provider space. There’s an
22 organization called West Penn Allegheny Health System that
23 through the last decade has provided very stiff competition
24 in western Pennsylvania and now there is an organization
25 called Allegheny Health Network, which is being set up by 151
1 Highmark to provide stiff and very welcome competition in
2 the provider space. But we have become the provider of
3 choice. We treat approximately 40 percent of the patients
4 in the region and we provide about 62 percent of the
5 charity care in the region.
6 Our mission also includes providing in the last
7 fiscal year alone $887 million in IRS-defined community
8 benefits, and just to put a little bit of perspective on
9 that, that’s an amount that’s nearly three times the total
10 of the Federal, State and local taxes that UPMC estimates
11 it would pay were it a for-profit organization. The
12 fiduciary responsibility to pursue UPMC’s charitable
13 mission and to protect its charitable assets falls most
14 directly on our board of directors, 24 volunteer civic
15 leaders who represent a broad cross-section of the
16 communities and the constituencies we serve.
17 Fifteen years ago, that board made one of its
18 wisest and most farsighted decisions: creating the UPMC
19 Health Plan. As Diane has pointed out, the UPMC Health
20 Plan has grown and western Pennsylvania now has what one
21 commentator has called an ideal competitive market for
22 health care with competition at both the insurance level
23 and at the provider level. This ideal competitive
24 environment has touched off what the media has called and
25 has recognized as a price war for health insurance, 152
1 something unseen in western Pennsylvania for decades.
2 For the region’s hospitals, however, this is a
3 mixed blessing. When Highmark acquired West Penn
4 Allegheny, it touched off what the Pennsylvania Insurance
5 Department has called a zero-sum game for hospital
6 admissions. To put it bluntly, western Pennsylvania simply
7 has too many hospital beds, and any gain in admissions at
8 one hospital must come at the expense of another hospital.
9 A heavily redacted chart, which is blown up here behind me
10 and also appears in my written statement, comes from
11 Compass Lexecon, the consultants to the Pennsylvania
12 Insurance Department, and shows exactly how Highmark claims
13 to save West Penn Allegheny Health System in this zero-sum
14 environment by tiering and steering more than 41,000
15 patients per year from UPMC and the community hospitals
16 over to West Penn Allegheny. Now, notably, Highmark
17 intends to do this, indeed, Highmark must do this whether
18 or not it gets a new contract with UPMC because without
19 those additional patients West Penn Allegheny will
20 eventually fail again.
21 As unsettling as this chart is for the region’s
22 hospitals, employers and consumers are quickly adapting to
23 this newly competitive environment. Employers like
24 Westinghouse, American Eagle Outfitters, Dick’s Sporting
25 Goods, PNC, BNY Mellon, EDMC and even the city of 153
1 Pittsburgh are offering their employees attractive
2 alternatives to Highmark insurance, and employees are
3 taking full advantage of those new options. By the end of
4 next year, most, if not all, of the region's employers will
5 be offering their employees an insurance option that
6 includes in-network access to UPMC.
7 Turning to House Bill 1621 and 1622, let me
8 suggest that it's promoted as a solution for a host of
9 supposed market ailments but in fact cures none of them.
10 Let's start with the often-repeated argument that these
11 bills will guarantee Highmark subscribers "affordable
12 access” to UPMC. Now, before considering whether they do
13 that, the Committee needs to assess what kind of access
14 will already be available when the current contracts expire
15 at the end of 2014.
16 In summary, by January 1, 2015, every insurable
17 resident in western Pennsylvania will have access to all
18 UPMC facilities and services with the vast majority of that
19 access being in-network. That's worth repeating. By
20 January 1, 2015, every insurable resident of western
21 Pennsylvania will have the option of access to all UPMC
22 facilities and services with the vast majority of that
23 access being in-network. More than half of the insurable
24 residents are guaranteed in-network access through
25 government programs like Medicare or Medicaid. In 154
1 addition, individual policyholders already have multiple
2 avenues to get in-network access to UPMC. Meanwhile, as I
3 indicated, more and more employers are offering
4 alternatives to Highmark.
5 Finally, even those people who keep their
6 Highmark insurance after 2014 will have in-network access
7 to Children’s Hospital, Western Psych, UPMC Northwest, UPMC
8 Bedford, UPMC Altoona, and any cancer services unique to
9 UPMC as well as full out-of-network access to all other
10 UPMC facilities and services. Clearly, anyone who wants
11 access to UPMC can get it when the contracts expire.
12 So would the proposed legislation improve on that
13 situation? Absolutely not. With or without that
14 legislation, Highmark will never again allow its
15 subscribers to use UPMC affordably. It can’t. In order to
16 resurrect West Penn Allegheny, it must steer tens of
17 thousands of patients into that system, and it will do that
18 by making UPMC unaffordable for its subscribers, just like
19 it is trying to do to Geisinger in central Pennsylvania,
20 and it must do that whether it gets a new contract or not,
21 and frankly, whether House Bill 1621 or 1622 are ever
22 enacted.
23 While speaking of access, let me address
24 Community Blue. This is a plan that’s been offered by
25 Highmark, one of the health plans that they offer. The 155
1 subscribers to that Highmark product did not have access to
2 UPMC not because they had the wrong insurer. They didn’t
3 have access to UPMC because they had a badly flawed plan
4 designed by that insurer. Highmark specifically designed
5 Community Blue to put most UPMC services out of network and
6 out of reach, and Highmark did that specifically so that
7 they would go to West Penn Allegheny.
8 The good news is that the provisions blocking
9 their access to UPMC expire at the end of 2014 along with
10 the other contract terms so their inability to receive care
11 at UPMC will also expire and they will be accepted out of
12 network. Note also, though, that House Bill 1621 and 1622
13 do not address the Community Blue situation at all because
14 they don’t address out-of-network services at all. That
15 legislation has also been touted as an antidote to a
16 supposed wave of provider consolidations and a check on
17 dominant hospital systems. In fact, the proposed
18 legislation deals not at all with that phenomenon.
19 Instead, it would impose its onerous regulatory burdens,
20 its required contracting including governmentally set rates
21 on any hospital of whatever size that offers a health
22 insurance program of whatever size in competition with
23 established insurers. Nor would the legislation reduce the
24 cost of health care to consumers. It does try to cap the
25 rates paid by insurance companies like Highmark to 156
1 hospitals and physicians at levels far below what those
2 insurers could obtain through arm's length negotiation.
3 Diane Holder and others have explained why this sort of
4 rate regulation has failed everywhere it has been tried.
5 But even if the rates paid to hospitals were kept
6 low, the proposed legislation does not require the insurer
7 to pas any of those savings onto the consumer through lower
8 premiums. If there's one lesson that western Pennsylvania
9 has learned over the last decade, it's that a dominant
10 insurer like Highmark can force very low rates on doctors
11 and hospitals and then raise premiums without any real
12 restraint, thereby earning tremendous profits and amassing
13 billions of dollars in reserves.
14 To the extent that some believe House Bill 1621
15 and 1622 can be a lever to force UPMC to give Highmark the
16 long-term contract Highmark so clearly covets, I'd suggest
17 consideration of the law of unintended consequences. Such
18 a contract, as Sam Marshall noted, would combine into a
19 collaborative relationship the region's dominant insurer,
20 its second-most dominant insurer, its dominant provider and
21 its second-most dominant provider. That combination would
22 control virtually all of health insurance and virtually all
23 of health care in western Pennsylvania, a result with
24 profound anti-trust implications and it would likely do
25 damage to the other hospitals and the other insurers trying 157
1 to do business in western Pennsylvania. Clearly, as Sam
2 Marshall has pointed out, western Pennsylvania will be far
3 better served by keeping Highmark and UPMC at arm’s length
4 from each other than by demanding that they find a way to
5 collaborate or forcing them to collaborate.
6 Another unintended consequence of the contract
7 between Highmark and UPMC would be the likely demise of the
8 former West Penn Allegheny Health System. While it was
9 seeking the Insurance Department’s approval to acquire that
10 health system, Highmark generated projections showing that
11 in the event it extended its relationship with UPMC, it
12 could not move enough volume into West Penn Allegheny to
13 turn that system around, and that explains why the
14 Insurance Department order approving the acquisition
15 specifically prohibited Highmark from entering into a new
16 contract with UPMC unless it produced expert analyses
17 showing that the proposed contract would not harm West Penn
18 Allegheny and would not lessen competition.
19 As I indicated, western Pennsylvania is adapting
20 quickly to the newly competitive environment, but what we
21 do need is a transition plan to move the region smoothly
22 through the end of next year when the current contracts
23 between UPMC and Highmark expire. The Insurance Department
24 has required as a condition of the West Penn Allegheny
25 acquisition that a transition plan be in place by the end 158
1 of July. We look forward to working with Highmark on that
2 plan. Thank you.
3 MAJORITY CHAIRMAN BAKER: Thank you very much for
4 your testimony. I have to ask the question because of
5 previous comments and your testimony. Do you believe that
6 with the advent or passage of this legislation it would
7 invite Federal antitrust action?
8 MR. MCGOUGH: What I suggest would invite Federal
9 antitrust scrutiny -- and Highmark and UPMC spent four
10 years under that scrutiny not very long ago -- what would
11 invite antitrust scrutiny would be a combination, forced or
12 unforced, between two entities that between them control 90
13 percent of the health insurance and 90 percent of the
14 provider assets in a particular region, western
15 Pennsylvania.
16 MAJORITY CHAIRMAN BAKER: And the references have
17 been collusion and monopoly.
18 MR. MCGOUGH: Correct, and as Sam Marshall
19 pointed out, two entities of that size ought not to be
20 encouraged or forced to enter into a deal that will work
21 for both of them but perhaps not for anybody else.
22 MAJORITY CHAIRMAN BAKER: Okay. Thank you.
23 I’ve been reminded w e ’re out of time, but we will
24 invoke the five-minute rule allowing an additional five-
25 minute cushion. 159
1 Representative Lawrence.
2 REPRESENTATIVE LAWRENCE: Thank you, Mr.
3 Chairman.
4 Tom and Diane, I appreciate your testimony today.
5 I want to ask a couple questions about a political-style
6 mailer that UPMC recently sent out. Specifically, I think
7 it would be fair to call it a political attack on one of
8 the sponsors of this legislation. Certainly I believe in
9 free speech. The mailer says that it was sponsored by
10 UPMC. I have three quick questions. First, which arm of
11 UPMC sent this mailer? Was it a for-profit entity or a
12 nonprofit entity?
13 MR. MCGOUGH: UPMC, which is the not-for-profit
14 entity.
15 REPRESENTATIVE LAWRENCE: Who were the recipients
16 of this mailer? Were they limited to one legislative
17 district or one political party?
18 MR. MCGOUGH: No, they were not limited to one
19 political party. They were limited to Representative
20 Christiana’s district and they were targeted or directed
21 toward residents of that district that we could identify
22 who we believed would be interested in this aspect of that
23 legislation.
24 REPRESENTATIVE LAWRENCE: Can you tell me how the
25 mailing list was obtained for this mailer? 160
1 MR. MCGOUGH: Well, the mailing list was
2 generated, as I said. It was an effort, as I understand,
3 an effort that synthesized a lot of different information,
4 a lot of it available on the Web, to try to identify
5 residents who would be particularly interested to know that
6 Representative Christiana and House Bill 1621 and 1622 was
7 asking essentially for a governmentally imposed rate-
8 setting regulatory regime.
9 REPRESENTATIVE LAWRENCE: That sounded like a
10 very complex answer.
11 MR. MCGOUGH: It was a very complex process.
12 REPRESENTATIVE LAWRENCE: So was the mailing list
13 obtained from a list of voters, or could you provide more
14 information on that, how it was obtained?
15 MR. MCGOUGH: I mean, I can’t provide a simple
16 answer to it because there was no one list from which this
17 or one source from which this list of about 750 people was
18 drawn.
19 REPRESENTATIVE LAWRENCE: So it was 750 people?
20 MR. MCGOUGH: Approximately, yes.
21 REPRESENTATIVE LAWRENCE: Okay. Thank you, Mr.
22 Chairman.
23 MR. MCGOUGH: And if I might add, just to put it
24 into context, that mailing, we believe, has to be viewed in
25 the larger context, and what we have going on in western 161
1 Pennsylvania and have had for months is a truly regrettable
2 political-style campaign being waged between two large not-
3 for-profit organizations, Highmark on the one hand, UPMC on
4 the other. Both organizations are not-for-profit. Both
5 organizations are headed by 501(c)(3) entities. Both
6 organizations operate charitable hospitals. Both
7 organizations are the beneficiaries of tax exemptions.
8 Those of you who are in western Pennsylvania or
9 southwestern Pennsylvania are aware of the saturation-level
10 television advertisements that have been run directed
11 toward supporting House Bill 1621 and 1622 where the
12 principal argument is essentially UPMC is awful, therefore,
13 contact your State legislator and encourage them to support
14 1621 and 1622. That's regrettable.
15 It's also regrettable that UPMC felt it had to
16 respond in various ways and using various media outlets to
17 protect essentially its charitable mission. Not only was
18 the legislation viewed as a direct assault on that
19 charitable mission but the advertisements themselves were
20 viewed as a direct assault on the charitable mission.
21 REPRESENTATIVE LAWRENCE: I guess my question is,
22 you used the language yourself that this was a political-
23 style campaign going on but my understanding is,
24 Pennsylvania campaign finance law bars spending from anyone
25 other than individuals and political action committees. 162
1 MR. MCGOUGH: I think the campaign or the
2 advertising campaign, we are allowed under law even as
3 nonprofits, both Highmark and UPMC are allowed to engage in
4 issue-oriented campaigns, particularly directed at
5 legislation that affects our charitable mission, which is
6 exactly what 1621 and 1622 are, and exactly what Highmark
7 was doing when it was running these highly negative and
8 inflammatory television advertisements about UPMC and
9 exactly what we were doing when we responded in that
10 fashion. We all wish we didn’t have to do that; I can
11 assure you we do. It would be better if that campaign had
12 never been initiated, and if it were to end tomorrow, that
13 would be a good thing. But this is clearly -- the entire
14 campaign is well with the bounds of what nonprofit
15 organizations are permitted to do on issue-related
16 advocacy.
17 REPRESENTATIVE LAWRENCE: Thank you, Mr.
18 Chairman.
19 MAJORITY CHAIRMAN BAKER: Okay. Our five minutes
20 is up but very quickly, two quick questions, one by
21 Representative Stern and one by Leader Turzai.
22 Representative Stern.
23 REPRESENTATIVE STERN: I had a similar question
24 for Highmark and I didn’t get a chance to present the
25 question, but in my office in the district, recently 163
1 Altoona was acquired by UPMC, and the concern, and I'm
2 receiving the emails and getting support for 1621, 1622.
3 My concern is about senior citizens. My office is getting
4 an awful lot of phone calls as we move forward, and it's my
5 understanding that this dispute in western PA is more about
6 the commercial operation or the commercial market rather
7 than senior citizens, and I'm getting calls from senior
8 citizens concerned about Medicare and their Medicare
9 Advantage programs that will they or will they not have
10 access to UPMC.
11 I want to pose the very same question to
12 Highmark, and I have that question prepared for the
13 Executive Director to submit to them, but I want it on
14 record today whether this will impact seniors moving
15 forward.
16 MR. MCGOUGH: No, it will not impact seniors
17 moving forward. Highmark and UPMC have already agreed and
18 have taken you joint newspaper advertisements and
19 individual advertisements that specify that Medicare
20 Advantage and Medicaid patients will not be affected by the
21 expiration of the commercial contracts at the end of 2014.
22 REPRESENTATIVE STERN: And the concern in Blair
23 County, I believe it's hardly fortuitous that there was a
24 half-page ad taken out in today's Altoona Mirror that says
25 that "UPMC is committed to ensuring that Highmark members 164
1 including seniors on Medicare have in-network access to
2 UPMC Altoona for all Highmark insurance products. As the
3 region’s largest hospital, we firmly believe that all local
4 residents should maintain in-network access to the doctors
5 and hospital they trust. W e ’re committed to working with
6 Highmark so that the expiring contracts between Highmark
7 and UPMC in the Pittsburgh area will not impact Highmark
8 subscribers’ access to UPMC Altoona,” of which I ’m a
9 Highmark subscriber after 2014. I ’d like to have your
10 answer on record today about that as well.
11 MR. MCGOUGH: Yes. I mean, that’s absolutely
12 true. We are and we have been since before we acquired
13 Altoona back in the summer have made it clear that Altoona
14 like Bedford, like Northwest, like Hammett are separate and
15 insulated from the core dispute between Highmark and UPMC,
16 and if you want the definition of where the core dispute
17 is, it’s right there on this chart. This is where Highmark
18 has indicated it’s going to move 41,000 admissions, and
19 that’s where the board resolution actually, which is
20 included in your materials...
21 REPRESENTATIVE STERN: I saw that material.
22 Thank you very much.
23 Mr. Chairman, thank you.
24 MAJORITY CHAIRMAN BAKER: You’re welcome,
25 Representative Stern. 165
1 Leader Turzai.
2 REPRESENTATIVE TURZAI: To Diane and Tom, thank
3 you for being here.
4 UPMC Health Plan came into existence about 15
5 years ago and created competition in the insurance market.
6 Just a question to Tom. You would agree then that it’s a
7 good thing that somebody came in with capital to make sure
8 that West Penn Allegheny survived and offered competition
9 on the provider level. Didn’t you agree with that
10 statement?
11 MR. MCGOUGH: I think w e ’ve said that it’s a good
12 thing, and Highmark is just the organization to do it.
13 REPRESENTATIVE TURZAI: And put 1621 aside and
14 1622 aside. Do you support changes to Act 94, and do you
15 think there needs to be State antitrust language to make
16 sure that there is not any significant monopoly?
17 I myself don’t think a contract in and of itself
18 creates a monopolistic solution. It’s the actions in terms
19 of becoming a singular health insurer or a singular
20 hospital system in a very large region is the concern from
21 an antitrust perspective, given my understanding of it.
22 MR. MCGOUGH: Okay. Let me take them one at a
23 time.
24 As far as Act 94 goes, as was pointed out
25 earlier, Act 94 only really deals with a transition period 166
1 at the end of the termination of a contract between a Blue
2 insurer and a hospital, and allows for transition time.
3 The Insurance Department has already set up a transition
4 process in its order approving the West Penn Allegheny deal
5 that will kick in on July 31st per a plan that’s to be
6 developed between UPMC and Highmark so we don’t believe
7 there’s really any additional role for Act 94 to play here.
8 Now, turning to the antitrust concerns, and
9 you’re a lawyer, Mr. Leader, and I ’m a lawyer and we can
10 have a good lawyers’ discussion over this, but any time you
11 have one entity, whether it be a contractually bound entity
12 or entities that are merged together that controls and can
13 control 90 percent of anything, it’s going to attract some
14 antitrust scrutiny.
15 REPRESENTATIVE TURZAI: Thank you, Mr. Chairman.
16 MAJORITY CHAIRMAN BAKER: You’re welcome, Leader
17 Turzai.
18 I’d like to acknowledge the presence of the
19 gentleman, Representative Petri, joining us as a Health
20 Committee Member.
21 All right. We really are out of time. In fact,
22 I think w e ’re 15 or 20 minutes behind time. We did so well
23 this morning. But thank you very, very much. Your
24 testimony is well received, and our Members are greatly
25 advised. Thank you. 167
1 Next up, Starr Romano. What a great name. Starr
2 Romano, Registered Nurse, UPMC Altoona Hospital; Theresa
3 Brown, Registered Nurse, Pittsburgh, Pennsylvania; and Neil
4 Bisno, President, SEIU Healthcare Pennsylvania.
5 Starr, you may proceed when you’re ready.
6 MS. ROMANO: Thank you. Good afternoon. My
7 name’s Starr Romano. I ’m an trauma ortho, trauma neuro
8 registered nurse working at UPMC Altoona, formerly Altoona
9 Regional Health System, formerly Altoona Hospital.
10 The legislation of House Bill 1621 and 1622 hits
11 particularly close to home for Blair County residents
12 because our local hospital was acquired by UPMC over the
13 summer. Almost 44,000 people in Blair County have Highmark
14 insurance and don’t know if UPMC will continue accepting
15 their insurance. UPMC has said and published that they
16 certainly will remain in-network in Altoona and those other
17 hospitals. The biggest concern to myself and to other
18 patients, especially to the patients that have hmm
19 products, is, will they have access in-network to the
20 hospitals they get transferred the most to, which is
21 Presbyterian, Montefiore, Shadyside, the big three, also
22 Magee Womens, which is also huge, where we transfer
23 patients quite a bit.
24 In my opinion, UPMC should accept Highmark
25 subscribers and ensure in-network access without any 168
1 strings attached. I have elderly patients with Security
2 Blue, the Medicare Part B provider, who tell me they are
3 worried whether they will be sent to the next nearest
4 hospital, which can be as far as 40 minutes away.
5 I've been a nurse since 1980. That's 33 years
6 going on 34 years. And I've always wanted to bring help to
7 people with my medicine and medical knowledge but also
8 compassion and human connection, and this is becoming very
9 much the cookie cutter medicine, and I've had patients who
10 have questioned whether they should take a certain test or
11 have a procedure while inpatient because they don't know if
12 their insurance will cover it, and I used to say don't
13 worry, you're in the hospital, it'll cover it, but now that
14 isn't true. Everyone is worried about having the right
15 insurance because they go through with any crucial
16 procedure or test. As a health care provider, this is
17 heartbreaking. The scariest part is, patients don't have
18 much choice at this point and are trapped. UPMC dominates
19 the Blair County Market. Under the hospital umbrella, they
20 operate Allegheny Health Care Staffing, which is a temp
21 nurse staffing agency, Home Nursing Agency, which is a home
22 nurse and hospice service, and Home Health Resource, a
23 durable medical equipment supplier, among other businesses.
24 UPMC also owns Bedford Hospital, which is about 40 minutes
25 away. 169
1 If you're not happy with your UPMC physician,
2 it's hard to find a different one because UPMC owns Blair
3 Medical, Mainline Medical and some surgical practices, and
4 Blair Medical and Mainline Medical are pretty much the big
5 physician providers at least in the Altoona area.
6 The legislation needs to pass because people
7 should have a choice in their health care providers. They
8 shouldn't be restricted from going to their local hospital
9 simply because the new owner doesn't like their insurance,
10 and they shouldn't have to pay an exorbitant amount of
11 money to continue seeing their long-time physicians, and
12 that isn't fair and it doesn't make sense. They're not
13 just patients, they are our neighbors and we are a
14 community hospital.
15 As a nurse, I support House Bill 1621 and 1622
16 because I don't want to have to check someone's insurance
17 first to see if they should get care, and they should be
18 able to get that care without breaking the bank.
19 Thank you.
20 MAJORITY CHAIRMAN BAKER: Thank you.
21 Theresa.
22 MS. BROWN: So thank you for allowing me to
23 testify today and for holding these hearings.
24 I'm Theresa Brown. I'm a clinical nurse. I work
25 in the Pittsburgh area, and I'm also an opinion columnist 170
1 for the New York Times writing about nursing and health
2 care.
3 So because of my writing work, people come and
4 tell me stories about health care. I ’ve got two today that
5 show the pain UPMC will cause if they follow through on
6 their threat to deny Highmark patients access to UPMC
7 hospitals.
8 The first from an anonymous source is complicated
9 so I ’ll try to be clear. Recent discussions at UPMC on the
10 location of a fetal echocardiogram program -- that means
11 prenatal heart scans, so scans of pregnant women to look at
12 the heart function of the babies they’re pregnant with.
13 They considered Children’s Hospital and Magee and Womens as
14 possible locations. Children’s was rejected in the end of
15 clinical reasons along the theory that it wouldn’t have the
16 follow-up that pregnant women would need. That would only
17 be at Magee and Womens. But while these clinical options
18 were being weighed, word came down from higher-ups on the
19 business side at UPMC that the fetal echo program had to be
20 at Magee and Womens and not at Children’s because
21 children’s will remain accessible to patients with Highmark
22 insurance whereas Magee and Womens will not if the contract
23 is not renewed. UPMC administrators insisted on having the
24 fetal echocardiogram program at Magee with the goal of
25 pressuring Highmark customers into switching to UPMC 171
1 insurance.
2 We should all think about that for just a moment.
3 It would probably be a smaller number of women, but the
4 decision was made to proactively select pregnant women out
5 of a specialized prenatal program for the sole purpose of
6 scaring those women and others into buying health insurance
7 from UPMC. That’s story number one.
8 So now story number two is from a stem cell
9 transplant patient I ’ve stayed in touch with, and that was
10 my area of specialty for several years. So this patient
11 was diagnosed with leukemia and received a stem cell
12 transplant at UPMC Shadyside when I worked there at a
13 nurse. It is not exaggerating to say we saved this man’s
14 life from acute myelogenous leukemia. Stem cell is the
15 only treatment that’s considered a cure, although you don’t
16 get a guarantee, unfortunately. But this patient has
17 Highmark insurance so he’s concerned he’ll either have to
18 switch insurance to keep seeing his UPMC doctors or switch
19 doctors to continue using his Highmark insurance.
20 Stem cell transplant, like any transplant, any
21 solid organ transplant, requires lifelong follow-up, and
22 the risk of disease recurrence is always present. So any
23 change is scary because he needs complex, ongoing care
24 that’s consistently covered, and this means monitoring,
25 blood tests. It’s a lifelong monitoring that has to be 172
1 done very carefully.
2 A health care organization should not cure
3 someone’s cancer and then effectively say to them, because
4 of your insurance, your life just doesn’t matter as much to
5 us anymore.
6 I wrote about this issues surrounding access in a
7 recent New York Times column called "Out of Network, Out of
8 Luck." In that column, I argued that the generosity bar
9 should be set higher for health care than for any other
10 business, and I believe that very, very strongly.
11 These stories show that UPMC is falling below the
12 generosity bar. This bill proposed by Representatives
13 Frankel and Christiana will keep it set high. Thank you.
14 MAJORITY CHAIRMAN BAKER: Neil.
15 MR. BISNO: I am President of SEIU Healthcare
16 Pennsylvania, the State’s largest union of nurses and
17 health care workers, and w e ’re part of the largest health
18 care union in North America representing over a million
19 nurses and health care workers across the U.S., Canada and
20 Puerto Rico, and I should say that our members work in all
21 of the health systems that have testified today -- UPMC,
22 Geisinger, Allegheny Health Network -- and our members also
23 are insured I think by all of the carriers that have
24 testified or been alluded to. We’re not aligned with a
25 particular health system or particular insurer. Our 173
1 members are committed to ensuring access to quality,
2 affordable health care for our patients, for consumers, for
3 every member of our community, and I know that the
4 legislators share that same goal.
5 W e ’re also keenly aware of the need to contain
6 rising health care costs, which are putting health care out
7 of reach for working families and placing tremendous
8 pressure, as we know, on the budgets of private employers
9 as well as Federal, State and local governments.
10 We strongly support House Bill 1621 and 1622. We
11 view it as commonsense legislation that would ensure
12 access, promote competition and help contain health care
13 costs for taxpayers and for all Pennsylvanians, and let me
14 explain why. The trend that’s been referred to in much of
15 the testimony today, virtually every month a new headline
16 appears somewhere in our State announcing that a community
17 hospital is either in talks with or has reached agreement
18 to be taken over by a large conglomerate.
19 This is a trend that’s been present for years but
20 I think it’s been alluded to, it’s really been accelerated
21 in part by the passage of the Affordable Care Act, which
22 promotes efficiency, which is a good thing. It promotes
23 collaboration and coordination among providers, which is a
24 good thing. It promotes evidence-based medicine, which is
25 a good thing. It promotes investment in electronic medical 174
1 records, which is a good thing.
2 So let me clear: consolidation in health care is
3 very likely inevitable, and it is not necessarily a bad
4 thing. Quite the opposite, if it helps move our health
5 care system toward an emphasis on quality over quantity,
6 toward value rather than volume as the guiding principle
7 behind health care delivery and financing, that’s all good,
8 and I think w e ’ve seen the results. In fact, Geisinger
9 testified earlier. I think they’re probably the best
10 example in the country of the building of an insurer and a
11 health system and a large and growing entity providing very
12 positive results in terms of both cost and quality.
13 The reality is, however, that by vesting a
14 handful of very sprawling health care systems with
15 significant power over pricing and access, consolidation of
16 our health care system can also have some significant
17 potential negative impacts on health care quality and cost.
18 Simply put, unregulated monopolies in health care
19 like those in other industries lead to higher costs, lower
20 quality, diminished accountability and transparency.
21 Research indicates that health care providers in
22 concentrated markets charge higher prices, which are passed
23 along through higher insurance premiums to all of us, both
24 in individual and employer-provided plans. Yet as w e ’ve
25 heard today, higher costs and higher prices do not 175
1 correlate to more efficiency, to higher quality nor to
2 better health outcomes for the community, and these effects
3 of consolidation are even more pronounced in so-called
4 vertical monopolies where hospitals combine with insurers,
5 physician practices and urgent care centers. Like the
6 vertical monopolies of old that we read about in the
7 history books, these mammoth institutions control much of
8 the supply chain of health care and they therefore wield
9 outsized market power, and I think that's a very important
10 factor to consider that sometimes doesn't come through in
11 some of the testimony about the abstractions. In the real
12 world, huge providers wield outsize market power and it
13 distorts competition.
14 As anybody who lives in western Pennsylvania, as
15 I do, knows or has been following health care there knows,
16 this is not an abstract or a hypothetical issue for
17 millions of residents of the second most populous region in
18 the State, and I won't repeat what's already been testified
19 to, but the reality is that UPMC now controls approximately
20 60 percent of the acute-care hospital beds in Allegheny
21 County. Costs at its flagship hospitals are among the
22 highest in the country. Pittsburgh today is one of the
23 most consolidated health care markets, much more so than
24 Philadelphia or other large communities in our State or
25 others. It's one of the most consolidated health care 176
1 markets in the country and it's also one of the highest-
2 cost markets in the country yet those higher costs are not
3 translated into better health outcomes. Allegheny County
4 ranks in the bottom half of Pennsylvania counties of
5 various population health measures like diabetes, cancer
6 death rate and heart disease. That's a problem.
7 UPMC's market dominance, as we've heard and will
8 hear, is having profound implications not just for cost but
9 also for access. We're all aware of the announcement by
10 UPMC to deny in-network access to Highmark subscribers the
11 end of this year. In reality, let's just be clear on what
12 this means. This means that hundreds of thousands of
13 western Pennsylvanians, the majority of the residents of
14 the region, would be locked out of most of the region's
15 hospitals and physician practices, wreaking havoc on
16 patient care and on health care market, at least on an in
17 network basis. And we'll hear about Community Blue. It's
18 only relevant because it shows what can happen when a large
19 health system seeks to deny access. In this case, refusing
20 to render services even on an out-of-network or cash basis
21 to thousands of our union's members and other western
22 Pennsylvanians who are members of Highmark's Community Blue
23 plan, literally cutting off patients from their longtime
24 UPMC doctors and treatment centers in the middle of their
25 course of treatment. That's not a rumor. That's happening 177
1 now to our members and to others.
2 As professionals on the front lines of care,
3 registered nurses have a unique and highly credible
4 perspective on this issue. I think we all know that nurses
5 are rightfully so some of the most trusted voices in health
6 care. In a recent poll of nurses, both union and non
7 union, in Allegheny County, 90 percent including 87 percent
8 of nurses employed at UPMC’s own hospitals agreed that when
9 hospitals refuse to contract with insurers, they put
10 patients at risk by disrupting the continuity of care, and
11 89 percent of nurses including 88 percent of UPMC-employed
12 nurses said they support a new contract between UPMC and
13 Highmark.
14 Beyond the serious patient-care issues raised by
15 UPMC’s plan, it raises real questions about the
16 responsibilities of a purely public charity. So of course,
17 a tax-exempt institution, that’s a status granted by the
18 State, many people feel -- I ’m among them -- that it’s
19 simply wrong for an institution that was literally built
20 through the generous tax exemptions granted by its
21 community to refuse those same members of the community
22 reasonable access to its services simply because they carry
23 the wrong insurance card. So for all these reasons, we
24 strongly support House Bill 1621 and 1622.
25 I just want to end with a couple of points. 178
1 Although UPMC’s plan to cut off Highmark patients from in
2 network access is the most striking example, the bills as
3 written are in no way targeted toward UPMC. Indeed, they
4 would apply equally. I repeat, they would apply equally to
5 Allegheny Health Network and to other integrated delivery
6 networks. All combined health systems and insurers would
7 be held to one reasonable standard. How that is an attack
8 on one system’s charitable mission I don’t get.
9 Second, as we will hear, this is not a western
10 Pennsylvania issue. Geisinger already operates a huge and
11 growing system, an integrated delivery network. W e ’ve
12 heard from them this morning. Experts project that the
13 trend toward providers uniting with insurers will
14 accelerate rapidly, as w e ’ve heard. It was interesting
15 when Geisinger testified this morning, although they oppose
16 the legislation, they are not engaging in any of the
17 practices that the legislation is designed to curb. That’s
18 not true in western Pennsylvania, and some day, if
19 Geisinger has less enlightened leadership, they could make
20 a different decision, and we hope that they wouldn’t, but
21 it’s interesting that they’re not doing the things that the
22 legislation is trying to stop, which is kind of telling
23 about the need for the legislation now and in the future.
24 Finally, as evidenced by the partisan
25 affiliations of its chief sponsors, this legislation really 179
1 should not be a political issue, political mailers
2 notwithstanding. Rather, it is a consumer and a patient
3 issue, and as the largest union of nurses and health care
4 workers in the State, we look forward to working with
5 legislators on both sides of the aisle as well as the
6 Corbett Administration to enact this commonsense
7 legislation that would protect choice and competition,
8 promote quality and cost efficiency in a health care system
9 that is rapidly changing.
10 Finally, I ’d just like to remind the legislators
11 that the time to act is now. Unless Harrisburg steps
12 forward to address this issue, the health care of hundreds
13 of thousands of western Pennsylvanians will be disrupted
14 not years from now, months from now. We simply cannot
15 allow the health, safety and well being of so many of our
16 citizens and the economy of an entire region to be
17 jeopardized by a business dispute between two large and
18 powerful institutions who are both charged to be
19 accountable to taxpayers and to the community.
20 Thank you.
21 MAJORITY CHAIRMAN BAKER: Thank you very much,
22 sir, for your testimony.
23 We ’ll allow five minutes even though w e ’re over.
24 Members, questions?
25 Representative DeLissio. 180
1 REPRESENTATIVE DELISSIO: Thank you, Mr.
2 Chairman.
3 I think I just heard two very different things,
4 one from your testimony, Mr. Bisno, and another one from
5 Mr. McGough before, and perhaps I ’m not paying as strict
6 attention as I should be. I believe UPMC testified that as
7 of the end of the contract, as of January 2015, a very high
8 percentage will have access to UPMC, and you just testified
9 that that isn’t accurate.
10 Unfortunately, I had a question for the previous
11 panel to clarify exactly what that meant because as I
12 understand this, if you hold a Highmark card as of January
13 2015, you will be out of network if you are in a UPMC
14 footprint.
15 MR. BISNO: I would never claim to speak for Mr.
16 McGough.
17 REPRESENTATIVE DELISSIO: No, no, just speak for
18 yourself.
19 MR. BISNO: Nor would he permit me to. I think
20 there’s an assumption perhaps on UPMC’s part that hundreds
21 of thousands of people will somehow migrate to either UPMC
22 Health Plan or one of the commercial insurers and therefore
23 somehow retain access. The problem is that individuals
24 don’t decide what health insurance plan they’re going to
25 choose. Even if they wish to, that’s generally not how it 181
1 works in the real world as opposed to the abstract world.
2 People’s employers make those decisions. Some of them are
3 collectively bargained. They’re multiyear contracts. And
4 the reality is that it is extremely disruptive of health
5 care in our region to force the migration of hundreds of
6 thousands of people either out of their health insurance
7 plan if they can even do that, or out of their physician
8 and hospital relationship if they’re forced to do that.
9 So I can’t speak to that claim but it is a simple
10 fact of life that 60 percent of residents of western
11 Pennsylvania are Highmark subscribers today. If this
12 legislation is not passed and if UPMC’s plan moves forward,
13 all of those people will either have to somehow get a
14 different insurance plan or they will lose access in
15 network to most of UPMC’s doctors and hospitals. That’s
16 extremely disruptive not just to the health care market but
17 to patients and also to our economy.
18 REPRESENTATIVE DELISSIO: Now, Mr. Bisno, do you
19 happen to know how many beds over there are in the region?
20 It appears that the region is over-bedded, is what I heard.
21 Do you happen to know by how many beds approximately?
22 MR. BISNO: I couldn’t quantify that. I think
23 it’s a consensus that health care is moving away from
24 inpatient hospitalization and toward other settings for
25 care along with continuum and that that transition is not 182
1 completed yet in western Pennsylvania, so it's true that it
2 is a highly institutionalized, highly bedded health care
3 market that needs to become more focused on other settings
4 over time. I can't quantify exactly where we are in that
5 process quite yet.
6 REPRESENTATIVE DELISSIO: Thank you, Mr.
7 Chairman.
8 MAJORITY CHAIRMAN BAKER: And last question,
9 Representative Frankel.
10 REPRESENTATIVE FRANKEL: Thank you, Mr. Chairman.
11 I just want to really point out, Starr and
12 Theresa's comments put a human face on I think on what's at
13 stake here with respect to access, and Neil's reemphasizing
14 I think the need for real competition. And just going back
15 again to the discussion before which we didn't get a chance
16 to really kind of vet out here, I think Diane Holder said
17 insurance competition makes everyone better. I'd say that
18 if it's good for insurance companies, it's good for
19 providers, and fundamentally, you can talk about having
20 these two integrated networks separate, but until you have
21 the providers within those networks competing on price and
22 quality against each other, which means the consumer has to
23 be empowered to make a choice and therefore have access to
24 all providers, we're never going to have provider
25 competition. It is a myth to say that there is provider 183
1 competition with these integrated delivery network systems
2 operating completely independently without any ability for
3 consumers to cross-fertilize and make choices and bring
4 competition.
5 With respect to the over-bedding issue that you
6 talked about, Neil, one of the things that we saw happen
7 because of this type of, I think, really screwy situation
8 we have in western Pennsylvania in terms of competition, I
9 mean, we had a health care system build a brand-new
10 hospital. We're over-bedded, and we spent hundreds of
11 millions of dollars of this community's resources, of our
12 taxpayer dollars, of our insurance premiums, of tax
13 exemptions to build an entirely new hospital five blocks
14 away from an existing hospital. That is not a way for us
15 to deploy the resources that are so precious to us that we
16 need to be able to direct to care, to access and making
17 care and treatment affordable and of high value and good
18 quality.
19 So just my comment at the end of the day. I
20 thank you, Mr. Chairman, for your leniency in allowing me
21 to do that.
22 MAJORITY CHAIRMAN BAKER: Thank you very much for
23 your testimony.
24 Next we have Cathy Doerfler, Highmark Community
25 Blue consumer, Pittsburgh, Pennsylvania, and Bill Kaufman, 184
1 HealthAmerica Medicare Advantage consumer, McVeytown,
2 Pennsylvania.
3 MS. DOERFLER: Good afternoon. My name is Cathy
4 Doerfler, and I ’m here from Pittsburgh. I want to thank
5 you, Chairman Baker, and all the Members of the Health
6 Committee for hosting today’s hearing and staying so late
7 to listen to all of us today.
8 I ’m here to bring you to the patient’s point of
9 view. I ’m a patient. I was a patient of UPMC. Four years
10 ago, I was diagnosed with a disease called scleroderma.
11 It’s an autoimmune disorder that affects the connective
12 issue of the body with major long-term debilitating
13 complications. This disease has made it hard for me to
14 move. It’s caused me terrible pain, and needless to say,
15 has had a huge impact on my life.
16 Fortunately, I live in a city where health care
17 innovation is a priority, and I found a local doctor at the
18 UPMC Arthritic and Autoimmune Center who was conducting
19 pioneering treatment and research into this disease. I
20 also participated in a research study at the University of
21 Pittsburgh Medical Center on scleroderma research. Being
22 able to receive treatment for my rare disorder has been one
23 of the best things that has ever happened to me, and
24 truthfully, this doctor, I was misdiagnosed the first time
25 and he diagnosed me correctly and treated me correctly, and 185
1 I was feeling much better. My condition had improved. I
2 was just much better.
3 After two years of receiving treatment, I changed
4 insurance providers to an affordable plan, the Highmark
5 Community Blue plan. I had many discussions with my doctor
6 before I did this, and they assured me we would work
7 something out because I really did not want to lose this
8 doctor. Shortly after the change, I received an alarming
9 letter from UPMC. The letter stated that I had 30 days to
10 find a new physician. I was shocked. I tried everything I
11 could to keep this doctor. UPMC even refused me to pay
12 cash out of pocket for my treatment. They cut me off
13 completely from my doctors that I had come to know and
14 trust, all because I carried a competitor’s insurance card.
15 I don’t believe my physicians had anything to do
16 with that decision process because they were wonderful, and
17 I must keep saying that. They were wonderful.
18 I now know that UPMC has systematically been
19 denying health care to patients like me carrying Highmark
20 insurance. It is not right for a health care institution
21 to turn patients away from care, for them to dictate which
22 doctors we can and cannot see. UPMC has lost sight of its
23 mission to ensure that every patient gets the right care in
24 the right way at the right time every time, and we need
25 State legislators like you to correct the problem that they 186
1 are creating for health care patients before they get even
2 worse.
3 I speak today not only for myself but for many
4 Highmark insurance holders who have had similar experiences
5 and some even worse than mine. We cannot allow health care
6 giants to use patients as pawns in their business
7 negotiations. We need them to focus on the core business
8 providing accessible, affordable health care to all
9 Pennsylvanians, and this is why it is important to me and
10 should be to you that House Bill 1621 and 1622 must be
11 enacted immediately.
12 Thank you very much.
13 MAJORITY CHAIRMAN BAKER: Thank you.
14 Bill?
15 MR. KAUFMAN: My name’s Bill Kaufman. I ’ve lived
16 in McVeytown nearly all my entire life. Over the years
17 I’ve seen a lot of changes with the health care in the
18 area. One big change is that Geisinger recently took over
19 my local and closest hospital, Lewistown Hospital, and I ’m
20 concerned about what that means for patients like me. When
21 they bought my community hospital, Geisinger fortunately
22 had to sign an agreement that they would continue to work
23 with all the current insurance providers and bargain in
24 good faith with them, but that agreement has an expiration
25 date, and from what I can see looking westward, the 187
1 campaign to get people to switch begins more or less
2 immediately. How long after UPMC agreed to accept Highmark
3 insurance did it start campaigning to reject it?
4 This leaves people frightened about their
5 futures. The truth is without legislation, we don’t know
6 what Geisinger plans for our community hospital. The
7 concern isn’t just theoretical. Where Geisinger has the
8 ability to reject outside Medicare Advantage, they do. In
9 Columbia County, folks with the wrong type of Medicare
10 Advantage are being forced to choose between losing access
11 to their community hospital or lose the insurance of their
12 choice because Geisinger has decided to only accept their
13 own Medicare Advantage plan, Geisinger Gold.
14 I’m retired and I ’m a veteran. My current
15 insurance is HealthAmerica Medicare Advantage. It is a
16 low-cost plan that I can afford on my restricted income
17 that gives me access to the hospital that is closest to me.
18 I like my insurance and I like having a real choice in my
19 insurance. With these large health care systems buying up
20 community hospitals and then only accepting their insurance
21 plans, every year more and more Pennsylvanians are losing
22 their ability to have that choice.
23 I have no problem with Geisinger. They’re a
24 leader in health care. But if big hospitals like Geisinger
25 are going to dominate the provider market and then have 188
1 their own insurance, they can't use that insurance plan to
2 exclude patients. We need assurance that we can see our
3 longstanding doctors and go to the hospital of our choice.
4 I'm worried that is so-called integrated delivery
5 networks continue to acquire and have the power to reject
6 competing insurance plans, that we are failing to protect
7 our patients. I could very likely be one of those people
8 who lose access to their doctors. I'm a senior citizen.
9 As I get older, having to travel farther for my health care
10 isn't something I want to do, and many of my friends feel
11 the same way. These hospitals are subsidized by seniors
12 like me, and I expect that our elected leaders will ensure
13 that they act in the best interest of the patients. That
14 is why I'm here to ask you to support this legislation.
15 It helps protect my choice and access to the
16 doctors and hospitals closest to me. Many Pennsylvanians
17 are experiencing problems with giant health care monopolies
18 taking over their local hospitals and denying them access
19 to their longstanding doctors. Without this legislation, I
20 could become one of those with no protection.
21 MAJORITY CHAIRMAN BAKER: Thank you, sir, for
22 your service in the military and for your testimony.
23 Any questions, Members?
24 Representative DeLissio.
25 REPRESENTATIVE DELISSIO: Mr. Kaufman, did I hear 189
1 you correctly that you were or are currently a
2 HealthAmerica Medicare Advantage consumer and as a result
3 of the acquisition of the Lewistown Hospital by Geisinger,
4 your HealthAmerica coverage will no longer be accepted?
5 MR. KAUFMAN: No, m a ’am. Basically they have an
6 agreement for eight years at Lewistown Hospital, and by the
7 way, I worked for them for 20 years. I retired from
8 Lewistown Hospital. And the agreement is, they have to
9 accept the insurances for eight years, but what happens
10 eight years?
11 REPRESENTATIVE DELISSIO: I see. So it’s not an
12 immediate concern?
13 MR. KAUFMAN: Yes, it’s long-term concern.
14 REPRESENTATIVE DELISSIO: Long term. Okay.
15 Thank you.
16 MAJORITY CHAIRMAN BAKER: I ’m just curious, Bill,
17 as is the case with my father-in-law, who’s a World War II
18 Marine Corps veteran, he prefers to go to other hospitals
19 and doctors and not the Bath VA Hospital in New York State.
20 Do you prefer to go to the non-military?
21 MR. KAUFMAN: Well, my thought was that’s like to
22 go to State College just to go to the clinic is one thing
23 but if I need further health care than that, I would have
24 to travel to Altoona and be it from there probably to
25 Pittsburgh. At least that’s what I ’ve been told. So I 190
1 like Lewistown Hospital. I worked there for years, and
2 that's why I carry the extra insurance so that I can go
3 there and it's my community so I like to support my
4 community and the hospital.
5 MAJORITY CHAIRMAN BAKER: Yes, sir. I appreciate
6 that. I've heard that from a lot of veterans. Sometimes
7 it's an access issue, it's a distance issue, or it's just
8 who you become confident with and who you trust, and you
9 develop a relationship with your doctor and your hospital
10 and you prefer to do that?
11 MR. KAUFMAN: Yes.
12 MAJORITY CHAIRMAN BAKER: Thank you very much.
13 Any other questions? Seeing none, thank you very
14 much for your testimony. And we're back on schedule. We
15 did have one cancellation due to a dental emergency, I
16 believe, so Pat Haines is here with us, Senior Vice
17 President of Benefits, the Board of Pensions of the
18 Presbyterian Church. Welcome. You may proceed, Pat.
19 MS. HAINES: Thank you. Good afternoon, Mr.
20 Chairman, and Committee Members. My name is Pat Haines,
21 and I'm the Senior Vice President of Benefits for the Board
22 of Pensions of the Presbyterian Church USA. I really do
23 appreciate this opportunity to speak to the Committee today
24 as a representative of a Pennsylvania-based employer group
25 health plan, and I particularly appreciate Representatives 191
1 Christiana and Frankel’s focus on the consumer, the
2 patient. That is the focus really of my testimony today.
3 I recognize that I stand between you and a well-
4 deserved holiday break, so I ’m going to try to be brief,
5 and I will pretty much stick to the text of my published
6 testimony.
7 The Board of Pensions is a Pennsylvania not-for-
8 profit religious corporation established under a civil
9 charter to administer the retirement and health and welfare
10 benefit programs for Presbyterian clergy and lay workers
11 nationwide. Our offices are located in Philadelphia, where
12 we have close to 200 employees. Our members are those who
13 serve or who have served the Presbyterian Church and our
14 mission is to provide those members and their families with
15 pension, health care and death and disability benefits. To
16 that end, we provide benefits to the 45,000 members and
17 beneficiaries employed by or retired from Presbyterian
18 churches and agencies nationwide.
19 Over 3,800 of the medical plans’ covered lives
20 are located in Pennsylvania including the Board’s employees
21 in Philadelphia. We listen to and learn from the many
22 church constituencies and people who depend on the Board’s
23 benefits. Not surprisingly, one of the most frequently
24 voiced concerns, which w e ’ve heard a lot about today, is
25 the unsustainable cost of health care. Providing high- 192
1 quality health coverage nationwide gives the Board of
2 Pensions a pretty unique perspective, I think. We provide
3 health care benefits to our members in markets across the
4 entire country. These markets, as you might imagine, vary
5 significantly in terms of both cost and access. We
6 understand the impact that robust competition can have on
7 local health care markets as well as the detrimental impact
8 that highly concentrated markets can have on health care
9 cost.
10 No matter the geographic location or local market
11 challenges, we have an obligation to provide all our
12 members with access to affordable, high-quality care, and
13 that’s really the reason that I ’m here today.
14 We have over 1,000 covered lives located in
15 western Pennsylvania, and I ’m really concerned about what’s
16 happening in that market. I ’m concerned that our members
17 in that region will lose access to the hospitals and
18 doctors of their choice and that this pattern could likely
19 repeat itself in other parts of the Commonwealth as large
20 health systems acquire more hospitals.
21 I ’m equally concerned that health care costs for
22 our church employers and members could escalate
23 significantly if a single health system is permitted to
24 stymie competition and control the market. It’s our
25 responsibility to try to manage cost for our employers and 193
1 members, and that becomes increasingly difficult when faced
2 with markets that are largely controlled by one dominant
3 health system.
4 Today’s health care system is really complicated
5 and it can be completely overwhelming to the patients it
6 purportedly serves. At a time of particular vulnerability
7 -- and you’ve heard from some of these patients and their
8 caregivers -- patients can get caught in the middle of
9 business disputes between health systems and health
10 insurers. In fact, I ’d suggest that they carry a perpetual
11 fear that their coverage may not be accepted at some future
12 time by a health care provider on whom they depend for
13 care. They often don’t know in advance if they’ll be faced
14 with a staggering medical bill because their treating
15 provider opts out or is forced out by his or her hospital
16 allegiance of their plan’s network.
17 The real issue here is that the disruption of
18 care that results from these disputes because patients are
19 separated from their providers, it absolutely has to impact
20 the quality of that patient care. It’s my understanding
21 that this legislation will require health systems that are
22 both a provider of health care and an insurer to be
23 accessible to all patients regardless of their coverage.
24 Health systems can then compete with one another for those
25 patients based on quality and cost -- Representative 194
1 Frankel, I think you’ve made that point several times today
2 -- not by denying patients based on their coverage access
3 to services or by forcing employers into costlier coverage
4 for the right of their members to see the doctor or
5 hospital they choose.
6 This legislation also provides an extremely
7 useful mechanism to resolve contract disputes between and
8 among hospitals affiliated with integrated delivery systems
9 and carriers so that patients are not put in the middle of
10 their commercial disputes.
11 The legislation does not provide comparable
12 relief to hospitals that have not merged with an integrated
13 health systems. Markets controlled by one dominant
14 insurer, including insurers that are part of an integrated
15 delivery system, might also lead to limited alternatives
16 for our members and the potential for increased cost. A
17 dominant insurer may drive patients towards higher-cost
18 hospitals affiliated with their systems. Unaffiliated
19 hospitals may be frozen out of reasonable reimbursement
20 contracts by dominant carriers. So I would respectfully
21 suggest that the arbitration mechanism should be available
22 to any willing hospital, not just hospitals in an
23 integrated delivery system.
24 As a Philadelphia-based plan sponsor with members
25 across the Commonwealth, I feel strongly that the 195
1 challenges that exist in western Pennsylvania need to be
2 addressed now so that it doesn’t become the model for
3 health system behavior in other parts of the State. The
4 challenge that you face as lawmakers is the same challenge
5 that frankly we face as payers and our members face as
6 consumers. The challenge we all face, and this is a
7 nationwide challenge, is an inefficient health care system
8 where quality frankly is elusive and costs are completely
9 unsustainable. This legislation presents an opportunity
10 for Pennsylvania to be a leader in promoting health care
11 competition without putting patients in the middle.
12 Thanks so much for the opportunity to present
13 today, and I ’m happy to take any questions.
14 MAJORITY CHAIRMAN BAKER: Thank you very much.
15 Members, any questions?
16 Representative Benninghoff.
17 REPRESENTATIVE BENNINGHOFF: Thank you, Mr.
18 Chairman.
19 I was just curious, have any of your members had
20 any problems with the current debacle that’s going on in
21 western Pennsylvania? I realize the majority of them may
22 be down in the eastern part of the State.
23 MS. HAINES: Only a year or so ago when the
24 dispute was pretty hot and heavy and we got some regular
25 phone calls from members in this part of the state, very, 196
1 very concerned about the entire issue of access. We
2 continue to hear about it. For now it's settled, but I
3 know that because they're paying attention to the news and
4 they know that 2015 is just around the corner that the
5 phones will start ringing again.
6 REPRESENTATIVE BENNINGHOFF: But in the interim
7 year, your clients currently are not having access
8 problems?
9 MS. HAINES: They are not having access problems,
10 no.
11 REPRESENTATIVE BENNINGHOFF: It's good to hear
12 that. Thank you.
13 MAJORITY CHAIRMAN BAKER: Any other questions
14 from the Members? Seeing none, thank you very, very much,
15 Ms. Haines.
16 MS. HAINES: I'm happy to get you back on
17 schedule early.
18 MAJORITY CHAIRMAN BAKER: Merry Christmas to you.
19 MS. HAINES: Thank you.
20 MAJORITY CHAIRMAN BAKER: We will now close, and
21 I want to thank the Members very much for attending all
22 day, but we do have some closing remarks, and I might add,
23 let's try to make them brief, and they're closing remarks,
24 not closing arguments.
25 First up, who would like to have closing remarks? 197
1 Representative Frankel.
2 REPRESENTATIVE FRANKEL: Thank you, Mr. Chairman,
3 and I really do appreciate the way you've handled this very
4 fairly, and I know it's been very challenging in order to
5 give us the opportunity, and I want to thank all those who
6 testified today presenting different points of view here.
7 I hope it was an education for everybody.
8 But I do think that Pat Haines, one of her last
9 remarks, is really what we want to do here, because what is
10 playing out in western Pennsylvania is really something
11 that I think presents a challenge to the rest of the State,
12 and indeed, it's a national issue so that we don't want it
13 to become a model for what happens in the rest of
14 Pennsylvania, and I think this legislation, while it may
15 need some adjustments and may be flawed, tries to deal with
16 the twin issues that I think face all of us as consumers
17 fair, broad access and reasonably priced products in health
18 care that give us great value and great outcomes. That's
19 what we want. That's what Jim Christiana and I are trying
20 to accomplish, and we believe that the direction of this
21 legislation leads us there in a fair and even-handed way
22 that promotes competition among insurers and among
23 providers.
24 Thank you, Mr. Chairman.
25 MAJORITY CHAIRMAN BAKER: Thank you, 198
1 Representative Frankel.
2 Representative Christiana.
3 REPRESENTATIVE CHRISTIANA: Allow me too to thank
4 the chairman, the Minority and Majority chairmen and your
5 staffs, for such an extensive amount of conversation today.
6 I would just like to wrap up that in 378 days,
7 there will be more folks forced to make a change if
8 Harrisburg doesn’t act, 378 days. Today the opponents of
9 this legislation talked about all kinds of other things we
10 should be focused on. Actually a few of them even said
11 your focus should be transparency in the process, balance
12 with this bill, should be balanced with other things. I
13 have to be honest: None of them said that we could allow
14 those patients to have access in 2015 with those
15 suggestions. There were reasons that we should be focused
16 on something else. In my opinion, our focus needs to be
17 the tens of thousands of people have the opportunity to go
18 to the doctor or the hospital of their choice.
19 While we may try to find silver bullets to fix
20 the health care industry, this bill is not targeted to do
21 that, and I think our focus should be as Democrats,
22 Republicans, liberals, conservative, business and unions.
23 I think that’s a positive step. That was the type of
24 testimony we heard today, and I think to solve this type of
25 problem, w e ’re all going to have to work together. 199
1 Spokesmen for organizations shouldn’t be
2 demonizing legislators for reaching across the aisle or
3 working with a union group that they typically don’t see
4 eye to eye on. I think we should be encouraging that type
5 of action in this building because that’s the only way
6 we ’re going to solve monumental problems, and that’s what
7 we ’re trying to do, and I ’m very encouraged by some of the
8 comments from my Democrat Members, Republican Members, and
9 I believe that we can solve this problem.
10 It may not look exactly like this. Actually, we
11 already talked about specific amendments to this bill to
12 make it even stronger, but I believe with the chairman’s
13 leadership, the Majority leadership and our friends across
14 the aisle, we can get this done in the best and most
15 responsible way possible for the patients.
16 Thank you, Mr. Chairman.
17 MAJORITY CHAIRMAN BAKER: You’re welcome.
18 Leader Turzai.
19 REPRESENTATIVE TURZAI: Chairman Baker, thank you
20 so much for vetting out this important issue. It’s been a
21 hallmark of your leadership and really of the House of
22 Representatives to take on important issues, to not shy
23 away from them, to vet them out, to learn the facts, and to
24 my colleagues, Representative Christiana and Representative
25 Frankel, many times issues come to the fore, someone has to 200
1 step up and say look, w e ’d like to have this addressed. I
2 applaud your willingness to jump in and to put potential
3 remedies on the table for all of us to consider in the
4 House of Representatives.
5 I do want to say these last remarks. I realize
6 that it is an issue that emanates from western Pennsylvania
7 but we recognize that this legislation and other proposals
8 have impact all across the Commonwealth of Pennsylvania,
9 and to all of our colleagues to take the time to understand
10 what’s in front of them is greatly appreciated.
11 In terms of western Pennsylvania, I would say
12 that with respect to Highmark, the fact that they were
13 willing to step in and make sure that there was a
14 competitive provider in the southwest and west in West Penn
15 Allegheny was in many ways a very, very important step in
16 making sure that there was competition on the health care
17 provider level, and we recognize also how important UPMC in
18 providing quality care is and the fact that UPMC Health
19 Plan provides competition in the insurance area. And that
20 is not to in any way exclude other health care providers or
21 other insurers. Everybody benefits when there’s a
22 competitive marketplace but it also has to be a fair
23 playing field, and w e ’re trying to make sure that it gets
24 there. In the end, it’s about quality health care and
25 reasonably priced insurance, and I think that’s a topic for 201
1 government to provide oversight for.
2 Thank you very, very much, Mr. Chairman.
3 MAJORITY CHAIRMAN BAKER: Thank you, Leader
4 Turzai.
5 Chairman Fabrizio.
6 MINORITY CHAIRMAN FABRIZIO: Thank you, Mr.
7 Chairman.
8 Very briefly, I too would like to thank all the
9 testifiers. We were provided a lot of good information, a
10 lot of food for thought today, and you’ve heard me say it
11 100 times: good information leads to good decisions, which
12 results in good policy and hopefully good government.
13 And I ’d also like to thank our chairman once
14 again. You must have had some railroaders in your family.
15 He ran a great railroad today, kept us on time, and I can
16 get home in my five-hour drive a little earlier.
17 Thank you.
18 MAJORITY CHAIRMAN BAKER: Thank you, Chairman
19 Fabrizio.
20 Let me first and foremost thank the staff for all
21 the hard work putting the testifiers together, putting all
22 the documents, transcripts, information together. We are
23 still open. If there’s questions that were not asked and
24 need to be answered, please submit them to the respective
25 executive directors and legal staff. We will attempt to do 202
1 our due diligence in getting the answers back to you as
2 quickly as possible.
3 Thank you very much to the testifiers for your
4 commitment and perhaps even long suffering. This is a very
5 difficult issue. It's a complex issue. It's a thought-
6 provoking issue and it's a very challenging issue, so I
7 really appreciate all the testimony and wish you all a very
8 Merry Christmas. Thank you.
9 The Health Committee is adjourned.
10
11
12
13 (The hearing concluded at 3 p.m.) 203
1
2 I hereby certify that the foregoing proceedings
3 are a true and accurate transcription produced from audio
4 on the said proceedings and that this is a correct
5 transcript of the same.
6
7
8 Florence E. Blantz
9 Transcriptionist
0 Diaz Data Services, LLC