By Jeffrey Barg.

Published October 1998

• React to this article in the Discussion Forum.

PND: Why has the Pittsburgh Business Group on Health recently released two highly critical statements on the region’s health care system?

MCM: As part of its ongoing investigation and developing a deeper understanding of what is happening in our marketplace, we believe that the Pittsburgh market is beginning to be controlled by a small number of dominate players in the market. We are going to be formally expressing our concerns about this to the appropriate state and local authorities.

PND: Who are these dominant payers?

MCM: UPMC has been growing rapidly to where it now represents approximately 43 percent of the region’s hospital beds and also represents a similarly disproportionate number of community health care specialty resources such as Magee Women’s Hospital. We also have a lack of effective competition among managed care plans. We can certainly point to the merger of Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield as an obvious example of that. Highmark Blue Cross Blue Shield is the dominant payer of health care benefits and represents approximately 68 percent of the market.

PND: Why is this market concentration a problem?

MCM: It has been a problem for a while now. We had Uwe Reinhardt speak at a dinner we hosted in February. He talked about consolidated markets dominated by a few players and the fact that it remains to be seen that consolidations really bring efficiencies, brings the elimination of excess capacities. Early indications are that that is not the case. The concern is that we will continue to see escalation of cost, continue to see excess capacity in the system. Another concern with some of the takeovers of community facilities, those community facilities are having specialty centers within them-whether they be heart centers or cancer centers. Do we need them? Are we spreading those specialty services too thin across too many institutions? If you are not treating an appropriate number of patients for those conditions, are you really developing the experience and expertise you need to assure quality outcomes on the part of the patients?

PND: What are you going to be doing to address your concerns?

MCM: We will be pursuing a number of different actions. We will be asking the Pennsylvania Insurance Department to rule on the status of the Pennsylvania Society of Internal Medicine’s request to intervene in the merger Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield and to hold a hearing if questions of fact or law exist. We also we be seeking a meeting with Pennsylvania Attorney General Mike Fisher. We hope to go to Washington and meet with the heads of the Health Care Task Force of the Federal Trade Commission and the U.S. Justice Department’s Antitrust Division. And we also will be communicating with our key state and federal elected officials as well as continuing to meet key individuals in the local health care system.

PND: What do you hope to accomplish through these actions?

MCM: Initially, we want to bring more public accountability to what is occurring. We believe that the Commonwealth Court did indicate that the Insurance Department should pursue having a hearing on the Blues merger. We would like to see that happen as part of public disclosure of these kinds of situations. We would like to see more discussion about the reasons for and determine what the benefits are and determine whether or not we have appropriate indications that what they say they are doing is accomplished. We want to have a better understanding of what is current regulatory oversight and then determine if it’s not what we believe to be appropriate to get some attention to what changes need to be made. Some of these entities are skirting antitrust by embarking upon affiliations where that kind of connection is not necessarily included in any kind of oversight today. The other key is public disclosure of key financial indicators by exploring what indicators we in public need to be aware of when we are looking at financial statements to determine that these entities are operated the way they should be.

PND: Will you be calling for Highmark and UMPC to divest some of their current holdings or prevent them from pursuing further consolidation?

MCM: We are gathering some data and strategizing right now about what we believe would represent a competitive balance in the market. But we have not finalized that position.

PND: When do you anticipate finalizing your position and meeting with the officials you mentioned earlier?

MCM: We hope that will happen quickly. My board has not established a timeframe, but we know we need to move very quickly on this.