The Department of Justice (DOJ) has approved a major payer-provider deal, having concluded its antitrust investigation into Pittsburgh-based insurer Highmark's proposed acquisition of West Penn Allegheny Health System.
Rather than reduce regional competition, the new integrated health system could aid Western Pennsylvania's health care markets by "providing [West Penn] with a significant infusion of capital and increase[e] the incentives of market participants to compete vigorously," according to the DOJ 's statement.
The department noted that local anticompetitive effects were "unlikely," given regional hospital market concentration and national insurers' efforts to enter the service area.
Background on the deal
Last year, Highmark and West Penn reached a $475 million agreement:
- The two would merge to form a new not-for-profit, called Highmark;
- The entity would include two subsidiaries—a not-for-profit health plan and a not-for-profit provider organization, which will include West Penn; and
- The deal would include $75 million to fund scholarships for students attending West Penn-affiliated medical schools.
Although some health plans have purchased clinics, and many hospitals have payment models that mimic insurance plans, insurers typically have avoided purchasing hospitals given the size of investment and operating challenges. However, rising health spending is pushing insurers and providers into new cost-cutting strategies, analysts say.
Reaction to DOJ decision
UPMC—the region's other major health system—in a statement agreed with DOJ's decision, saying the deal would "allow consumers to enjoy the benefits of more choice." The health system has not renewed its contracts with Highmark.
According to the Pittsburgh Tribune-Review, the deal still requires approval from the IRS, Pennsylvania's Insurance Department, the state Attorney General's Office, and the Allegheny County Orphan's Court.
The insurance department is expected to hold hearings on the deal's impact on regional competition next week, which may present the biggest challenge to the deal, according to the Pittsburgh Post-Gazette (Carlson, Modern Healthcare, 4/10; Nixon, Pittsburgh Tribune-Review, 4/11; Lord, Pittsburgh Post-Gazette, 4/10).