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

Heading: The Conspiracy Begins; the Dynamics Change

Text: In 1998, UPMC offered a truce to Highmark. Under the terms of the truce, each entity would use its market power to protect the other from competition. Highmark initially rejected UPMC's offer, criticizing it as an illegal attempt to form a `super' monopoly for the provision of health care in Western Pennsylvania in which [UPMC], the leading provider of hospital services, and Highmark, the leading health insurer, would combine forces. JA 95. The complaint alleges, however, that in the summer of 2002, over the course of several meetings, Highmark reconsidered and decided to accept UPMC's offer of a truce. The complaint alleges that UPMC agreed to use its power in the provider market to prevent Highmark competitors from gaining a foothold in the Allegheny County market for health insurance, and in exchange Highmark agreed to take steps to strengthen UPMC and to weaken West Penn. The complaint offers the following factual allegations in support of the conspiracy claim. UPMC engaged in conduct that effectively insulated Highmark from competition. First, it refused to enter into competitive provider agreements with Highmark's rivals. This prevented the rivals from entering the Allegheny County health insurance market because, given UPMC's dominance, an insurer cannot succeed in the market without being able to offer a competitively-priced plan that includes UPMC as an in-network provider. [3] Second, UPMC shrunk UPMC Health Plan (Highmark's main competitor in the insurance market). It cut the Health Plan's advertising budget and increased its premiums, which led to a sharp drop in enrollment. It also refused to sell the Health Plan to insurers interested in buying it, which might have revived it as a Highmark competitor. UPMC acknowledged that it decided to shrink the Health Plan as a result of negotiations with Highmark, in which Highmark had agreed to take Community Blue off the market. Meanwhile, Highmark took action that enhanced UPMC's dominance. Most significantly, it paid UPMC supracompetitive reimbursement rates. To afford UPMC's reimbursements, Highmark had to increase its insurance premiums (which, according to West Penn, it was able to do without losing business because UPMC had insulated it from competition). Highmark, moreover, provided UPMC with $230 million to build a new facility for its children's hospital, $70 million of which was a grant and the remainder of which was a low-interest loan. In addition, Highmark vowed not to offer a health plan that did not include UPMC as an in-network provider. Thus, in 2004, Highmark eliminated its low-cost insurance plan, Community Blue, in which UPMC had declined to participate. With the elimination of a leading low-cost insurance plan, health insurance premiums in Allegheny County rose. Furthermore, in 2006, Highmark publicly supported UPMC's acquisition of Mercy Hospital, which, other than West Penn, was UPMC's only other competitor in the market for tertiary and quaternary care services. Finally, in 2006, Highmark leaked confidential financial information regarding West Penn to UPMC, which in turn leaked a distorted version of the information to credit-rating agencies and to the business media in an attempt to destroy investor confidence in West Penn. JA 113. In addition, Highmark essentially cut West Penn off from its financial support, thus hampering its ability to compete with UPMC. Highmark, for instance, repeatedly rejected West Penn's requests to refinance the $125 million loan that was used to fund the 2000 merger. [4] Although Highmark believed refinancing the loan made business sense, it declined to do so out of fear that UPMC would retaliate against it for violating their agreement an agreement that Highmark candidly admitted was probably illegal. Highmark said that it was under a constant barrage from UPMC and that UPMC was obsessed with driving West Penn out of business. Highmark explained that if it helped West Penn financially, UPMC would allow one of Highmark's competitors to enter the Allegheny County insurance market or would sell UPMC Health Plan to a Highmark competitor. Indeed, UPMC had sent Highmark a letter containing such a warning. JA 107-09. Moreover, Highmark maintained West Penn's reimbursement rates at artificially depressed levels and repeatedly refused to increase them. In 2005 and 2006, for example, West Penn asked Highmark for a general increase in its rates, which were originally set in 2002. Highmark initially acknowledged that West Penn's rates were too low and suggested that it would raise them, but it ultimately refused to follow through, explaining that it could not help West Penn because, if it did, UPMC would retaliate. Finally, Highmark discriminated against West Penn [] in the award of grants to improve the quality of medical care in Allegheny County. In November 2005, for example, Highmark launched a program to provide grant dollars to improve the implementation of information technology in health care. The program provided for grants of $7,000 per physician, with an aggregate limit of $500,000 per health system. Only two health systems in Western Pennsylvania employed enough physicians to be limited by the $500,000 cap: UPMC and West Penn []. Highmark waived the cap in UPMC's case, awarding a grant of $8 million. [But] Highmark consistently refused to raise the cap for West Penn. . . . JA 113.