Opinion ID: 179967
Heading Depth: 3
Heading Rank: 2

Heading: Pre-Conspiracy Conduct

Text: In 2000, The Western Pennsylvania Healthcare System merged with several financially distressed medical providers, including Allegheny General Hospital, to form West Penn. Highmark funded the merger with a $125 million loan. Highmark's largesse did not spring from a sense of altruism but was intended to preserve competition in the market for hospital services. Had the financially distressed providers comprising West Penn failed, UPMC would have attained nearly unchecked dominance in the market. This would not have been good for Highmark: the more dominant UPMC becomes, the more leverage it gains to demand greater reimbursements from Highmark. (Reimbursements are the payments insurers give to providers to cover services rendered to the insurers' subscribers.) After the merger, Highmark and West Penn continued to enjoy a good relationship, as Highmark recognized that preserving West Penn was in its interests. Thus, Highmark encouraged investors to purchase bonds from West Penn, touting its financial outlook and the quality of its medical services. And in early 2002, Highmark gave West Penn a $42 million grant to invest in its facilities. In contrast to Highmark, UPMC has been hostile to West Penn since its inception. UPMC opposed the merger creating West Penn: it intervened in the merger proceedings, filed an unsuccessful lawsuit to prevent Highmark from funding the merger, and attempted (with some success) to dissuade investors from purchasing West Penn bonds. UPMC's hostility towards West Penn continued after the merger. Since West Penn's formation, UPMC executives have repeatedly said that they want to destroy West Penn, and they have taken action to further that goal on more than a few occasions. But more on that later. See Section I.E, infra. Historically, UPMC has also had a bitter relationship with Highmark. For example, when UPMC demanded purportedly excessive reimbursement rates from Highmark, Highmark responded by forming Community Blue, a low-cost insurance plan. To participate in Community Blue, a hospital had to agree to accept reduced reimbursements, but would receive a higher volume of patients. West Penn participated in Community Blue, but UPMC did not, claiming that its reimbursement rates were too low. UPMC responded to Community Blue by forming its own health insurer, UPMC Health Plan. UPMC Health Plan has been Highmark's main competitor in the Allegheny County market for health insurance since its formation. Moreover, Highmark and UPMC have faced off in litigation in the past. In a 2001 federal lawsuit, Highmark sued UPMC under the Lanham Act, asserting that UPMC had made false statements about Community Blue in an advertisement. The District Court agreed with Highmark and preliminarily enjoined dissemination of the advertisement; we affirmed on appeal. Highmark, Inc. v. UPMC Health Plan, Inc., 276 F.3d 160, 171-73 (3d Cir.2001). In another 2001 lawsuit, Highmark sought to enjoin UPMC's proposed acquisition of a children's hospital; Highmark claimed that the acquisition would violate the antitrust laws. The case ultimately settled, however, and UPMC acquired the hospital.