Does This Deal Deserve High Marks?

There was a surprise announcement from Old Main on Wednesday. Highmark would be "donating" $25 million to the Hershey Medical Centre with $20 million earmarked for a new pediatric wing and the remainder slated for cancer research. In addition, it was also announced-coincidentally?-that Highmark had received a contract to be the sole administrator of Penn State's self insured medical plan. If it weren't for the latter news about the contract this would have been unambiguously good news. However, the contract raises some serious issues which should be fully explored by the media.

While Highmark's insurance business is non-profit, the subsidiary which administers self insured plans is a for-profit entity. The folks at Highmark were insistent that there was no quid pro quo.

The company's contribution to the children's hospital was not contingent on Highmark administering Penn State's health plan, he said.

"At no point was there any trade-off between the three pieces," he said, referring to the two donations and the contract for the health plan.

Highmark entered into a similar 10-year partnership with the UPMC Health System in Pittsburgh in 2002 _ a $520 million deal that called for both parties to share the cost of converting the financially ailing St. Francis Medical Center into a new children's hospital, among other things.

Highmark did not take over the administration of UPMC's employee benefits, however, Melani said.

"It did lay the foundation, in some respects, for what we did here," Melani said.

The reason may be that they intend to treat the "donation" as a tax deductible gift.

The above article does not mention the contentious relationship between UPMC and Highmark over UPMC's takeover of Children's Hospital in Pittsburgh. Certainly the battle between UPMC and Highmark over UPMC's takeover of Children's Hospital in Pittsburgh would be worth exploring.

On the Penn State side, the changing of administrators for their self insured plan could result in a raise the rates or a reduction in coverage for their employees, retirees and the dependents of these people. If this happens then in essence Penn State would have borrowed the $25 million from Highmark and then asked it employees and retirees to help payback the loan. Of course, there will a problem in determining if the shift of administrators will cause a raise in cost to those covered by the plan.

University President Graham Spanier, at a press conference in Hershey, said cost controls are one reason behind the new agreement.

Figures that show how much money Penn State may save under the arrangement are proprietary, he said.

"Of course, (the rates) are always going to go up," Spanier said. But this plan, he went on, should help moderate the increase.

Should rate go up, Old Main will hide behind the idea that rates will always go up and use the fact that terms of the deal are proprietary so that no one will be able to determine if the rates went up faster under the new deal than they would have under the previous arrangements.And in typical Spanier fashion this deal which may have a negative impact on faculty was done without consultation of the faculty.

Joanna Floros, the Faculty Senate president, said the plan sounds good at face value. She said Highmark's parent -- the Blue Cross Blue Shield Association -- is strong.

But Floros, a professor in the College of Medicine, is not yet familiar with details of the new arrangement, she said. She said the Faculty Senate was not consulted as the university pursued an agreement with Highmark.

It is also worth noting that Highmark has had some legal problems in the recent past with the way they handled Medicare (here as well)and ambulance claims. Did Penn State turn a blind eye to the potential problems that the switch to Highmark may cause in order to get that $25 million up front?

I would hope that this deal gets the scrutiny from the media that it deserves and not just the kudos that comes from a superficial consideration of the "gift".

Technorati Tags: Penn State, Spanier, Highmark

powered by performancing firefox