Highmark looks to past in developing strategy for the future

Insurance giant Highmark Inc. is looking backward to build its future in becoming a health care provider, ringing western Pennsylvania with outpatient care centers and affiliating with a physicians’ practice.

Highmark announced on Wednesday that it will affiliate with Monroeville-based Premier Medical Associates, the biggest multi-specialty physicians practice in western Pennsylvania and a group that insurers have lauded for low-cost, high-quality medical care. Terms of the deal were not disclosed.

Details of the 10 outpatient centers, which will include a “medical mall” and outpatient surgery center in the Monroeville area, were not disclosed. The connection between the Premier affiliation and the outpatient centers could not be determined.

But Highmark’s choice of Premier was based on its operational efficiencies and capacity to meet quality care benchmarks, Highmark President and CEO Ken Melani said.

“They do it right,” he said. “Our data show that Premier provides care that is 6 percent less than the health care costs of other practices in the community. They always max out their incentive program.”

Premier will be a key ingredient in Highmark’s strategy in making West Penn Allegheny Health System the region’s low-cost and high-quality alternative to the University of Pittsburgh Medical Center.

HealthAmerica officials have also praised Premier’s cost-effective approach to providing medical care. In addition to employing around 60 doctors, Premier owns a medical imaging center, sleep study clinic and laboratory.

Premier’s physicians are also key to the survival of Forbes Regional because of patient referrals, hospital officials say, but Melani said they will also continue admitting patients to UPMC hospitals, depending on patient preference.

Big hospital networks went on a physician practice buying binge starting in the mid 1990s with the promise of filling hospital beds and better controlling medical claim costs. Highmark caught the bug in the mid 1990s and paid around $23 million to acquire 220 physician practices, then opened five primary care centers around the city.

But things did not work out as planned for systems, both locally and nationwide. Converting independent physician entrepreneurs into corporate employees could be difficult, sometimes because contracts lacked the productivity metrics that are common today. Also, health systems failed to properly integrate physicians into the bigger organization.

Premier was among Highmark’s acquisitions, but Highmark eventually sold its primary care centers in 1996 and shed its physician practices, which included Premier in 2004.

Highmark dusted off the strategy in June 2011 in announcing the acquisition of WPAHS and, most recently, its affiliation with Premier.

Whether Highmark’s rediscovered approach works hinges on a number of factors, including how well the insurer prepares for the coming era of bundled payments for services, said Edward Kabala, a partner at the Downtown law offices of Fox Rothschild LLP.

“Sure it can work,” he said. “It’s just a question of what the change in health care payments will be, the rules for accountable care organizations and what sort of integration you’re going to have going forward.”

Still, the costs of opening and running a doctor’s office are steep and there’s more uncertainty in solo medical practice than in the past, so physicians are more likely to join a large health system than go it alone, he said. Also, what has changed since the go-go mid 1990s is hospitals and providers have a better understanding of “what it takes to work with the physician,” Kabala said.

“Hopefully, it’ll work.”

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