Penn State Health, Highmark Announce Billion-Dollar Partnership

(Image courtesy Penn State Health press release)

A pair of major health institutions in the Northeast will engage in a joint venture to invest over $1 billion in value-minded community-based healthcare. Pittsburgh, Pennsylvania-based Highmark Health and Penn State Health announced the “game-changing” initiative late last week.

A. Craig Hillemeier, MD, Dean of Penn State College of Medicine and CEO of Penn State Health, called the move a commitment to create a patient-focused care model that “enhances overall health and wellness and creates increased opportunity for collaboration with community physicians.”

The 2 companies will pursue analytics-based population health and value-based care models for the management of chronic conditions. The new network will be anchored by Penn State University’s Milton S. Hershey Medical Center in Hershey, Pennsylvania, the lone research and teaching hospital in the central region of that state. The partnership will also increase Penn State College of Medicine’s funding for education and research.

In the arrangement, Highmark Health will become a minority stakeholder in Penn State Health, occupying as many as 3 of the 15 seats on the system’s Board of Directors.

Consolidation and collaboration between payers and hospitals have been ongoing nationwide. Highmark has faced bitter, at times litigious competition on its home turf from the University of Pittsburgh Medical Center (UPMC), one of the largest health systems in the country. Both a payer and a provider, UPMC has bought various practices throughout Western Pennsylvania, and recently announced a $2 billion plan to build 3 new, digitally-enhanced specialty hospitals. Some say its continued growth may be a motivating factor for other companies and systems in the state and region to seek similar integration.

As providers continue to consolidate into larger health systems, many payers are looking for influence or exclusivity with the growing monopolies. In regions with “cozy duopolies and oligopolies” of providers, as Penn State Milton S. Hershey’s own Marco D. Huesch, MBBS, PhD, told Healthcare Analytics News™ in a previous interview, lack of competition can be antithetical to analytics-driven, value-based innovation.

According to Penn State Health’s official statement, its arrangement with Highmark Health will aim to incorporate independent community physicians in its efforts in order to keep care localized while improving value. Penn State Health’s existing insurance arrangements will remain unchanged, the statement says, and Highmark’s payer arm, Highmark Inc., will remain “free to contract with other hospitals and health systems.”

“Our goal is to keep care in the community while enhancing local access to specialty care,” Penn State Health’s senior vice president William M. Bird, DO, said. “This partnership will help us do just that.”