UPMC successfully navigates high-profile disputes with Highmark

Client(s) University of Pittsburgh Medical Center (UPMC)

Jones Day has represented UPMC (University of Pittsburgh Medical Center) in several multi-disciplinary, multi-jurisdictional engagements involving UPMC's decision to not renew its in-network contracts with Highmark Inc. ("Highmark"), the Blue Cross/Blue Shield Association's licensee in Western Pennsylvania. It is believed that UPMC is the only major hospital system to successfully go out of network with a dominant BCBSA insurer. Over the course of more than four years, UPMC has retained Jones Day several times to deal with the various high-profile disputes that resulted from UPMC's decision.

Headquartered in Pittsburgh, UPMC is a fully integrated finance and delivery health system in Western Pennsylvania that operates more than twenty academic, community, and specialty hospitals, as well as its own insurance division. For over a decade, UPMC doctors and hospitals contracted to be in-network providers for subscribers to Highmark, which is the fourth largest BC/BS-affiliated company, among the largest health insurers in the United States, and a major insurer regionally, with millions of subscribers.

In 2011, Highmark announced that it would acquire the struggling West Penn Allegheny Health System ("WPAHS"), UPMC's primary competitor. Highmark's strategy, UPMC believed, was to maintain its insurance volumes by continuing to advertise UPMC and its premier facilities as an in-network provider, while simultaneously incentivizing patients to use WPAHS hospitals instead. UPMC thus believed that Highmark's acquisition of WPAHS threatened UPMC with the loss of tens of thousands of patients annually.

Accordingly, UPMC decided not to extend its commercial contracts with Highmark, which were set to expire in 2012. UPMC's decision was unprecedented: A major hospital system would be out-of-network with the insurer that represented the largest volume of patients in the region and the largest source of revenue. The decision touched off a public relations, political, and litigation firestorm that involved the highest level of Pennsylvania government. The contracts ultimately were extended until December 31, 2014 through a mediation by Governor Tom Corbett in 2012. In June 2014, at the Governor's insistence again, both UPMC and Highmark entered into Consent Decrees with the Commonwealth of Pennsylvania that provided for certain continued limited services for Highmark subscribers at in-network rates but allowed the contracts to expire at the end of 2014.

UPMC has turned to Jones Day to act as its principal legal representatives as the many facets of this business dispute unfolded. The resulting engagements have spanned over four years, several practice areas, and more than a dozen separate legal proceedings, including, inter alia:

• Jones Day filed commercial contract arbitrations on behalf of UPMC against Highmark before the American Health Lawyers Association and American Arbitration Association. These arbitrations alleged that Highmark breached the parties' contracts by unilaterally cutting UPMC's reimbursements in retaliation of UPMC's decision to not renew the parties' in-network contracts, and to coerce UPMC into a new contract. The three-member arbitration panel unanimously held that Highmark breached its contracts with UPMC and that Highmark's arguments to the contrary were "completely lacking in credibility or evidentiary foundation." The panel, by a 2-1 decision, further held that Highmark breached the covenant of good faith and fair dealing by reducing its payments. As trial counsel, Jones Day secured more than $188 million in contract damages from Highmark.


• Jones Day defended UPMC and subsidiary hospitals against a Lanham Act lawsuit brought by Highmark, alleging false advertising related to UPMC's "Keep Your Doctor" advertising campaign. The ads meant to inform patients of the upcoming changes to the healthcare market, including the end of certain provider agreements with Highmark. After multiple evidentiary submissions and a motion to dismiss, Jones Day defeated Highmark's request for a preliminary injunction. Then, in May 2012, Highmark agreed to dismiss its claims as part of a global settlement mediated by Pennsylvania Governor Tom Corbett. Highmark Inc. v. UPMC, No. 11-cv-919 (W.D. Pa.).


• Jones Day replaced UPMC's prior counsel in antitrust litigation under the Sherman Act. In consolidated litigation, Jones Day represented UPMC in both its affirmative claims against Highmark, and in defending against claims by WPAHS. These lawsuits were settled following a mediation with Governor Corbett and were dismissed after Jones Day successfully moved to enforce that settlement in December 2013. UPMC v. Highmark Inc., No. 12-cv-692 (W.D. Pa.); WPAHS v. UPMC, No. 09-cv-480 (W.D. Pa.).


• Jones Day replaced UPMC's prior counsel in a consumer antitrust class action, asserting that UPMC and Highmark conspired to foreclose competition. Royal Mile Co. v. UPMC and Highmark Inc., No. 10-cv-1609 (W.D. Pa.). Following briefing and argument on two motions to dismiss filed by Jones Day, the court significantly narrowed the scope of the conspiracy claims and potential class and dismissed all claims against UPMC alone. The remaining case was limited to an 18-month period and included only conspiracy claims and claims against Highmark alone, allowing UPMC to achieve a tentative settlement in January 2016.


• UPMC retained Jones Day to file a federal Lanham Act case against Highmark. UPMC alleged that Highmark made false and misleading statements in Highmark's latest advertisement campaign, aimed at trying to increase public pressure on UPMC to agree to new in-network commercial contracts with Highmark. UPMC v. Highmark Inc., Civ. A. No. 2:13-cv-1130-CB (W.D. Pa.). After UPMC filed suit, Governor Corbett created a multi-agency task force to address advertisements by UPMC and Highmark. UPMC voluntarily withdrew its lawsuit following the creation of this task force.


• Jones Day represented UPMC in a Commonwealth Court action by the Pennsylvania Attorney General's Office to enforce the Consent Decrees entered into with the Commonwealth of Pennsylvania brought. UPMC had terminated its Medicare Advantage contracts with Highmark because Highmark had unilaterally cut UPMC's oncology rates. Commonwealth v. UPMC, No. 334 M.D. 2014 (Pa. Commw. Ct.).


• Jones Day acted as lead counsel in two last-best-offer, baseball-style arbitrations. Jones Day represented UPMC in a five-day arbitration regarding rates that Highmark must pay to UPMC under the Consent Decrees for 2016 through 2019. The resulting rate increases were substantial. Jones Day represented and settled on the morning arbitration was scheduled to start a dispute regarding the scope of continuity of care services that will remain in-network to Highmark's commercial subscribers.


• Jones Day is defending UPMC against a lawsuit Highmark filed in September 2014 against UPMC and its subsidiary hospitals seeking to recoup $300 million in past oncology reimbursements. Highmark Inc. v. UPMC, No. GD-14-15441 (Allegheny Cty. Ct. Com. Pl.). Jones Day is further representing UPMC in a related appeal as to whether this case was properly filed in Common Pleas Court or should proceed in arbitration.


• Jones Day is representing UPMC in a lawsuit filed in January 2016 against Highmark for Highmark's 2% reduction in Medicare reimbursements to UPMC related to CMS's sequestration cuts. UPMC v. Highmark Inc., No. 16-00488 (Cumberland Cty. Ct. Com. Pl.).