Highmark-affiliated Penn State Health is moving forward with plans to build a 108-bed hospital in Cumberland County, across the interstate from UPMC Pinnacle West Shore.
At least one health care industry expert says the move signals increasing competition in the midstate, and a potentially ugly battle between the two rival health systems.
Penn State Health says building a hospital in Cumberland County puts patients who might otherwise go to Penn State Hershey closer to the services they need. It's a coincidence that the location is so close to UPMC West Shore, said Penn State Health Chief Strategy Officer Tom Stoessel.
"We looked sort of far and wide and this was simply the best piece of land that we could locate and come up with a reasonable financial deal on that also serves our purposes," Stoessel said. Penn State Health bought the 44-acre tract, assessed at $2.6 million, for $12 million in 2017, county records show.
With its growing economy and a spate of recent health system mergers and affiliations, midstate Pennsylvania is showing signs of increasing competition, said Robert Morris Health Care and Economics professor Stephen Foreman.
It's not the first time a hospital has planted its flag so close to another one, Foreman noted. In 2012, the UPMC East hospital was built about one mile from Highmark's Forbes Hospital in Monroeville, Allegheny County. That drew protests from some people, who wanted to see UPMC keep a hospital in the nearby, financially distressed town of Braddock open instead of building a new one.
"My concern is is the public going to be paying for this competition?" Foreman said. "If you're building more hospitals than we need, then will consumers end up paying for that? And the answer is probably yes."
It also will lead to less choice, Foreman said. He pointed to Allegheny County, where UPMC and Highmark excluded the rival hospitals from one another's in-network insurance plans. The state Insurance Department stepped in, creating a consent decree that requires them to accept one another's insurances in some cases.
That consent decree expires next summer, but Foreman doesn't expect any dramatic return to those days. However, he said the industry has already changed in big ways since then. These days, "narrow networks" have become the norm.
"Five years ago throughout the whole state almost all insurers let almost anyone be in network," Foreman said. "Networks were broad. People had a choice of where they went... Now as the competiton has heated up, everyone is trying to get patients into their own hospital. So, they're using insurance as a way to do that."
As of now, Highmark said it's in a contract to keep UPMC hospitals in-network until 2025, four years after the scheduled completion of the hospital. UPMC Pinnacle provided a statement saying "Penn State Hershey participates with UPMC Health Plan," but didn't respond to requests for more detail.
At the Insurance Department, Chief of Staff Allison Beam said a decision to charge patients more for visiting rival health systems is within the right of insurance companies, as long as they meet the state's standard of providing sufficient access to care.
"One of the things that the Insurance Department always advises consumers is that when you're purchasing a product you review the network of that product," Beam said.
At Penn State Health, Stoessel stressed that the planned hospital is a response to increasing demand in the fast-growing region. "Today, on any given day, Hershey medical center is above 100 percent occupancy, and we often are in a situation where we cannot take patients in from other facilities who are trying to transfer patients to us."
At Rober Morris, Foreman said that with Cumberland County's economic growth outpacing much of the state, this is likely the beginning of a lot more competition to come. That may drive up prices and limit options for employer insurance plans.
Still, he said, it's better to have a few health systems competing than to have only one remaining.
"Really what's created this is that we've let the market become so concentrated you don't have a lot of small firms competing, you have two big firms competing," Foreman said. "They can make decisions and don't have to suffer the same consequences as a small firm."