UPMC counters Pennsylvania AG, saying he’s unlawfully trying to force a new deal with Highmark 

Gavel and flag in courtroom
UPMC has countered the Pennsylvania AG's attempts to force it into a new deal with Highmark. (Getty/AlexStar)

Editor's note: This story has been updated to include a statement from the attorney general's office.

The University of Pittsburgh Medical Center is hitting back at Pennsylvania’s attorney general, saying he does not have the authority to force it into a deal with rival Highmark Health. 

UPMC filed a class action lawsuit (PDF) in federal court Thursday against state AG Josh Shapiro, alleging that he is unlawfully meddling in federal healthcare programs and has “illegally taken over nonprofit healthcare in the Commonwealth of Pennsylvania.” 

Shapiro sued the healthcare giant earlier this month, claiming that UPMC is not living up to its charitable obligations as a nonprofit, with the goal of pushing it into a new, long-term deal with Highmark. 

The AG’s lawsuit is built on the “unfounded” idea that all nonprofit providers and nonprofit health plans are required to contract with any interested party, UPMC said, which “fundamentally” changes existing law governing Medicare Advantage, Affordable Care Act health plans and ERISA-qualified group plans. 

“General Shapiro has imposed mandatory contracting requirements, has forced rate-making arbitrations before panels that he hand-picks and has ordered removal of corporate boards to ensure his complete control,” UPMC said. “Any entity that fails to agree to these terms faces draconian penalties, including the potential loss of nonprofit status.” 

RELATED: UPMC, Highmark breakup making it hard to do enrollment for seniors 

UPMC and Highmark’s feud has been ongoing for the better part of a decade and began in earnest in 2011 when Highmark purchased what is now Allegheny Health Network to challenge UPMC in the provider space. 

Pennsylvania officials forced the two to make nice in 2014, when both parties agreed to a consent decree that guaranteed each health plan would pay for services provided at the other’s facilities. However, that deal is set to expire this summer, potentially leaving members of both health plans in the lurch. 

Shapiro said he came to UPMC and Highmark with modifications to the consent decree, with the goal of extending it, which Highmark accepted but UPMC rejected. He accused UPMC of failing to meet charitable requirements—threatening to revoke its nonprofit status—to push it into the new deal. 

In a statement, a spokesman for Shapiro's office said the AG is "confident" in the petition, and that Shapiro and his team "are not intimidated by these court filings."

“With their filings today, UPMC has shown they intend to spend countless hours and untold resources on a legal battle instead of focusing on their stated mission as a non-profit charity—promoting the public interest and providing patient access to affordable health care,” said Attorney General’s Office spokesman Joe Grace. “As stated previously, Attorney General Shapiro remains willing to work with UPMC on modifications to the consent decree that would protect Pennsylvania consumers."

"We seek a resolution that protects patients – not a continuation of the protracted conflict and bickering that has impacted Western Pennsylvania for many years," Grace said.

In its lawsuit, UPMC said that forcing it into a specific agreement is also “self-defeating” in addition to being illegal. Making contracts mandatory will prevent an insurer from appropriate network management and from forecasting costs effectively. However, at the same time, Shapiro is also against a deal with clauses that would prevent insurers from building tiered networks that steer patients to certain providers, UPMC said. 

RELATED: Penn State Health, Highmark Health sign $1B value-based care network deal 

In tandem, these two positions will lead to greater administrative burden on nonprofit health plans and higher costs, while offering a competitive advantage to for-profit plans and providers. 

“Insurers who can force a provider into a contract can market to consumers that the provider is ‘in-network,’ but then tier and steer through the benefit design in ways that are confusing and impenetrable to consumers so that there will be significant economic burdens in selecting that provider,” UPMC said. “Combining mandatory contracting with tiering-and-steering gives consumers the illusion of access, but without removing any of the practical restrictions on access.” 

Alongside the countersuit, UPMC filed a motion (PDF) in state court requesting that the attorney general’s petition be dismissed.

The health system said the AG has failed to show why the modifications to the consent decree—which include replacing the majority of UPMC’s board and an agreement to contract with Highmark indefinitely—is in the public interest. 

“The petition takes pains to recite the history of this case and catalog UPMC’s alleged bad acts, but it never explains how the proposed modifications would address those wrongs, why they are necessary or what effect the terms would have on the public if they were implemented,” UPMC said in the motion.