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Justices Grant Expedited Appeal as End Date Looms for UPMC-Highmark Consent Decrees

Health insurance costs. Photo: Bigstock.

Photo: Bigstock

With a June 30 deadline fast approaching, the Pennsylvania Supreme Court has granted a request by the state, along with health insurer Highmark, to decide whether consent decrees between Highmark and health care network UPMC should be extended indefinitely until litigation between the two feuding companies is resolved.

The bitter fight between Highmark and UPMC centers on their inability to reach an agreement regarding UPMC's continued treatment of Highmark insureds. From 2002 until 2012, the companies operated in accordance with a 10-year provider agreement under which UPMC agreed to treat and bill patients with Highmark insurance according to negotiated rates, court documents said. But in 2011, ahead of the termination date of that agreement, UPMC announced it would not renew or renegotiate the pact, citing Highmark's planned affiliation with West Penn Allegheny Health System, which ultimately was approved, creating an entity in direct competition with UPMC.

Following the intervention of the Attorney General's Office, the state insurance commissioner and the secretary of health, UPMC and Highmark entered into separate but nearly identical consent decrees that allowed for Highmark subscribers to continue receiving in-network treatment from UPMC until June 30, 2019, court documents said. (Due to the acrimony between them, Highmark and UPMC both refused to sign a single document, so there are two separate consent decrees that differ only in that UPMC's version requires UPMC to comply with its requirements and Highmark's version requires Highmark to comply with its requirements, according to court records.)

The issue now before the state Supreme Court is whether the courts have the power to modify, at the request of the state, the end date of those consent decrees.

On April 3, Commonwealth Court Judge Robert Simpson ruled that, despite a modification provision in the consent decrees, the end date was one aspect of the agreements that could not be altered. Simpson pointed to a ruling from last year by the state Supreme Court, which held that the June 30 termination date "was an unambiguous and material term of the consent decree."

In the state's April 8 petition to the Supreme Court seeking either permission to appeal or, in the alternative, extraordinary relief, the state Attorney General's Office argued that the Commonwealth Court "gave undue protection to one term of the consent decree (its termination date) over another negotiated, material term (the modification clause) which distinctly allows modification of the entirety of the consent decree without restriction."

The petition also said the Commonwealth Court incorrectly relied on black-letter contract law in its interpretation of the consent decrees.

"While broadly applicable to the interpretation of consent decrees, such common law is derived from general contract principles," the petition said. "But those contracts do not typically contain modification clauses at all, much less modification clauses—like in this specific consent decree —that contain material terms addressing negotiating desired modifications by the parties, petitioning a court that expressly retains jurisdiction to decide such modification requests, and identifying the permissive standard by which the overseeing court shall judge such requests:

whether 'the requested modification is in the public interest.'"

Highmark joined the petition, echoing the state's argument that a failure to extend the end date of the consent decrees for the pendency of the litigation would substantially harm hundreds of thousands of western Pennsylvania residents.

But in its April 12 response, UPMC accused the state of trying "to pour its old wine into a new legal bottle, contending that the consent decree's general modification provision overrides all other provisions in the agreement, supersedes the court's 2018 opinion, and authorizes imposing on UPMC—in perpetuity—a slate of new and unprecedented obligations set forth in a modified 'consent' decree to which UPMC never agreed."

"Rather than offer legal authority to the lower court, OAG essentially argued—and is arguing now—that by agreeing to a boilerplate modification provision in a five-year consent decree, UPMC somehow put itself under OAG's unfettered control forever. That defeats the purpose and plain intent of having a termination provision in the first place,'" UPMC's filing said.

In its April 16 order granting the state's appeal, the Supreme Court directed the prothonotary to establish a briefing schedule that would allow for oral argument on the matter to be heard during the court's May session in Harrisburg.

On April 17, Simpson issued an order staying the remainder of the claims against UPMC in Commonwealth Court during the pendency of the Supreme Court appeal on the modification issue. Those stayed claims allege UPMC has violated the Solicitation of Funds for Charitable Purposes Act; the Nonprofit Corporation Law of 1988; the Uniform Trust Act; and the Unfair Trade Practices and Consumer Protection Law.

Joe Grace, director of communications for the Attorney General's Office, said in an April 17 statement, "Yesterday’s Pennsylvania Supreme Court order granting our petition to appeal in our case against UPMC is welcome news. Through this appeal to the Supreme Court, our case will move forward and our efforts to protect western Pennsylvanians’ access to affordable care will continue.”

Paul Wood, UPMC's chief communications officer, said in a statement, "This is as we expected. UPMC is confident the Supreme Court will affirm the Commonwealth Court's April 3, 2019 ruling that the consent decrees end on June 30, 2019—a ruling which is entirely based on the previous Supreme Court decision from last July."

Highmark's attorney, Doug Cameron of Reed Smith in Pittsburgh, did not immediately respond to a request for comment.