Two months before Highmark Inc. announced a deal to acquire West Penn Allegheny Health System for $475 million, the state’s largest health insurer advanced the financially troubled hospital network $25 million, documents made public today show.

The $25 million advance in April was in addition to $50 million Highmark gave West Penn Allegheny when the two organizations on June 28 announced their planned merger. West Penn Allegheny had disclosed the $25 million advance in a previous financial disclosure but only said that it came from “a commercial payor” and would “be used to offset future reimbursements from the commercial payor.”

The detail of the advance came to light in a new version of the acquisition agreement between Highmark and West Penn Allegheny that was filed in federal court today. A previous version of the agreement had many sections blacked-out as confidential business information. But U.S. District Court Judge Arthur Schwab ruled the entire agreement had to be made public, with only a few exceptions.

A plan by Highmark Inc. to streamline its pharmacy network and a contract dispute between Walgreen Co. and Express Scripts, which manages UPMC Health Plan’s pharmacy program, could have many Walgreens customers looking for a new pharmacy soon.

Beginning in January, Highmark will begin its transition to a new network that will exclude Walgreens and Target pharmacies.

The move, initially affecting about 100,000 members of Highmark’s small group market, will be completed by Dec. 31, 2013, according to a statement from the insurer.

The move was a result of Highmark’s ability “to negotiate more aggressive discounts with the pharmacies that remained in the network, resulting in savings for Highmark’s employer groups and members,” the statement said.

While the Highmark pharmacy network will go from 61,000 pharmacies to 52,000, Highmark officials say more than 96 percent of its members will still be within seven miles of a network pharmacy.

Find out more at the Post-Gazette.

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The contract showdown between the University of Pittsburgh Medical Center and Highmark Blue Cross Blue Shield has prompted a state senator to call for large nonprofits to pay property taxes statewide.

UPMC, Highmark, universities and other tax-exempt organizations “are buying up a lot of prime real estate and taking the property off the tax rolls,” said state Sen. Wayne Fontana, of Pittsburgh.

“If there is a large part of people not paying, it trickles down,” he said.

Fontana, D-42nd Dist., last week started circulating proposed legislation that would require nonprofits to pay taxes on their land, but not their buildings and other improvements.

The proposal, first reported in the Pittsburgh Post-Gazette, would exempt the first $200,000 of the assessed value of a nonprofit’s land. Fontana said that provision is meant to insulate smaller nonprofits from the tax.

Fontana repeatedly has introduced similar legislation, which has never come to a vote. In 2005, for example, he proposed a bill that would impose an “essential services fee” on nonprofits to compensate their host municipalities for fire and police protection and other core services. One of the co-sponsors of that bill was state Sen. Jane Earll, of Fairview Township, R-49th Dist.

UPMC will not negotiate a new contract with Highmark, the health system’s chief legal officer said Wednesday.

UPMC’s W. Thomas McGough Jr. told members of Allegheny County Council that the only issue the hospital system would discuss with Highmark was the best way to dissolve their relationship.

“This is not a negotiating ploy,” Mr. McGough said.

The current contract between the region’s largest health insurer and the largest hospital system expires on June 30, 2012.

Mr. McGough’s answer clearly disappointed several members of council.

“I think you should lock yourselves in a room and talk,” council Vice President Charles Martoni told Mr. McGough and Dan O’Malley, Highmark’s western region market president.

Mr. Martoni and other council members said they were getting a flood of phone calls, emails and visits from constituents worried about which doctors they could see and which hospitals they could use if UPMC and Highmark end their relationship.

Mr. McGough said University of Pittsburgh Medical Center facilities, including the Hillman Cancer Center and Magee-Womens Hospital, would remain open to patients with Highmark insurance.

Lack of a new reimbursement agreement, however, would make treatment at UPMC facilities “out of network” for Highmark customers. That situation likely would result in treatment charges doubling or tripling, Mr. O’Malley warned.

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UPMC officials want to negotiate the terms of their divorce from insurer Highmark Inc., according to a copy of a letter obtained by the Tribune-Review.

In the letter dated Friday and hand-delivered to Highmark, UPMC’s top lawyer said it’s time for the two nonprofits to talk about how they will wind down their contracts that expire June 30, 2012. After that, UPMC’s 2,700 doctors will be out-of-network for Highmark’s 3 million Western Pennsylvania members. Most of UPMC’s 19 hospitals in the region will remain in the Highmark network until June 30, 2013.

“There should be ample time to enable a smooth, seamless transition, but only if we start discussions now,” Tom McGough Jr., UPMC’s senior vice president and chief legal officer, wrote in the letter.

UPMC wants to negotiate with Highmark over items such as: continuing Medicare and Medicaid coverage, the availability of specific UPMC facilities or physicians during any transition period, protocols for the transfer of medical records and guidelines for handling cases of ongoing treatment or other hardship.

Highmark spokesman Michael Weinstein declined to comment Friday on the letter, which was addressed to Maureen Hogel, Highmark’s executive vice president and chief legal officer.

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Hospital employees expressed relief Tuesday that Highmark Inc. will take over West Penn Allegheny Health System, though some people questioned the insurer’s intentions.

“It looks like it will save West Penn Hospital,” said William Marsh, 49, of Gibsonia, a medical technologist at Allegheny General Hospital in the North Side who hopes the system will then hire staff. He said about half the workers in his department were laid off. “I think we’re running as lean as possible.”

Highmark will provide a $50 million cash infusion for the ailing West Penn and Forbes Regional hospitals as part of the deal, which needs approval from state regulators.

“I think it’s great,” said Nancy Liberatore, 55, of Bloomfield. “Everyone is going to be happy in Bloomfield,” where some people worried West Penn would close and saddle the neighborhood with an empty building.

Highmark officials said they wanted to preserve competition, improve the quality of health care services and save policy holders money. Some observers are skeptical.

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Health insurer Highmark, Inc. says it’s merging with the struggling West Penn Allegheny Health System.

Highmark, based in Pittsburgh, is Pennsylvania’s largest health insurer, and it says the merger will help control costs. The deal will provide a financial cushion for West Penn Allegheny, which runs Allegheny General Hospital in Pittsburgh.

Highmark says it is immediately providing a $50 million grant to West Penn Allegheny, as part of a total financial commitment of up to $475 million over four years, including $75 million to fund scholarships for students attending medical schools affiliated with WPAHS, and to support other health professional education programs.

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UPMC and Highmark Inc. need to stop bickering and work out a new contract, some area employers said Wednesday.

The region’s largest health system and largest health insurer are scaring people with all of their talk about how patients will not have access to doctors and hospitals in the future, benefits managers told the Tribune-Review.

“We respect both companies and their right to do business, but clearly they’re both important in this community,” said Cheryl Melinchak, president of the Pittsburgh Business Group on Health and benefits director at Westinghouse Electric Co., one of the area’s largest employers. “There’s a need for them to get back to talking to one another.”

Wendy Doolan, benefits manager for the 350 employees at Clearview Federal Credit Union and the business group’s secretary, was franker: “They need to knock it off. Let’s come around and stop playing games.”

Highmark said yesterday it remains open to talks. UPMC spokesman Paul Wood said that’s not going to happen.

“This is not saber rattling,” Wood said. “There will not be a contract.”

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“Over the past decade, so-called patient-centered medical homes have been the Next Big Thing in medicine, a new method of primary care designed to coordinate care more effectively, improve communication among doctors, patients and insurers and provide better outcomes for the patient while curbing per-member costs for the entire system.

On Monday, Pittsburgh health insurer Highmark Inc. announced that it was making its first big foray into this new way of practicing medicine, with pilot programs at 13 physician practices in Western Pennsylvania, the midstate and West Virginia, affecting up to 45,000 customers and patients.

The program launches in earnest June 1, but many of the involved practices have been working on related efforts for years, investing in electronic records, overhauling payment programs for doctors, rethinking patient scheduling and otherwise preparing for a brave new world of health care in which outcomes and value, not volume, drive the system.”

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