Does U of P Health System intend to become a health insurance company like Geisinger?

By Robert Field

Lancaster General Hospital refuses to provide information to the local media or the public concerning to what extent it will be absorbed into the University of Pennsylvania Health System and why LGH is taking such an action.

If the purpose is simply to create an even greater monopolistic strangle hold for providing health care resulting in higher costs, then the merger should be stoutly resisted.

But if the goal is to create a large enough entity to justify providing health insurance, then this may be a merger of much value to North East Pennsylvania and part of the a solution to our exorbitantly inefficient and mediocre national health system.

In the recently published book “America’s Bitter Pill”, author Steven Brill discusses insurance companies who are providers of care: “Fully integrating this way incorporates the core goals of the public-payer plans that the reformers have long championed – control the incentive to run up costs and eliminate the for-profit insurance company middleman that has an incentive to skimp on care.”

Here are some of Brill’s observations from the final chapter.

“The insurance company would not only have every incentive to control the doctors’ and the hospitals’ costs, but also the means to do so. … Conversely, the hospitals and doctors would have no incentive to inflate costs or overtreat, because their ultimate boss… would be getting the bill when those extra costs hit his insurance company. [Glenn Steele, Jr.] had already proved this on a smaller scale at Geisinger.”

“As [UPMC’S CEO Jeffrey] Romoff put it, ‘All the incentives are aligned the right way. It’s the beauty of being the payer and provider at the same time. The alignment of interests are just so pure.’”

“But let’s ensure that accountability by insisting on tight regulation, mostly through the smarter use of federal antitrust law and state regulatory authority, in return for giving … the freedom to expand and also to become their patients’ insurance companies.”

“The first regulation would require that any market have at least two of these big, fully integrated provider-insurance company players. There could be no monopolies, only oligopolies, as antitrust lawyers would call them.”

“The second regulation would cap the operating profits of what would be these now-allowed dominant market players…” Brill suggests four other sensible regulations.

Then Brill comes to the same startling conclusion as did Ezekiel Emanuel, MD, an author of the Afforable Care Act, did in “Reinventing American Health Care”.

Brill opines “Fully integrating this way incorporates the core goals of the public-payer plans that the reformers have long championed – control the incentive to run up costs and eliminate the for-profit insurance company middleman that has an incentive to skimp on care.”

Is this what U of P and LGH have in mind? Or is this just a way for a bunch of executives to enhance compensation and create golden parachutes?

Because LGH and its CEO Tom Beeman refuse to share information about the intentions for the merger with LNP and the public, there is no way to tell.

With the most recent annual earnings of $150 million, the value of LGH approximates $1.5 billion to $2 billion dollars. With its ‘Public Charity’, 501 (c) 3 classification, LGH is exempt both from income taxes and real estate taxes. It is Lancaster largest employer. Aren’t the media and through them the public entitled to information and answers?

Both the Washington Post review of Emanuel’s book and the New York Times review of Brill’s offer much praise for the content but are skeptical concerning their prognostication of the restructuring of the health care system and its benefits.

Is the proposed merger another indication that both authors may have it right?

Let’s hope so. But we fear the worse.

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Updated: April 26, 2015 — 11:11 am
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