Deadline looms for insurer, regional health system

With less than a week before their contract expires, WellSpan Health and UnitedHealthcare remain at odds.

If they are unable to reach an agreement by Thursday, WellSpan would become out-of-network for people covered by UnitedHealthcare's Medicaid, Medicare Advantage and employer-sponsored plans.
In a statement, the York-based health system blamed the impasse on UnitedHealthcare's "unwillingness to find a middle ground on negotiations."
Efforts to reach a UnitedHealthcare spokesperson on Friday were not successful.
But in previous statements and in online updates, UnitedHealthcare has argued that WellSpan is seeking unsustainable increases for providing care.
WellSpan has characterized its request as a "fair, middle-single-digit overall increase" even in the face of an 18% spike in costs for staffing, drugs and supplies.

Who's in the middle: About 36,000 members of UnitedHealthcare in Central Pennsylvania.

Absent a deal, they will have to switch providers or pay higher out-of-network charges to continue seeing WellSpan providers.
"WellSpan is the predominant healthcare provider available to most of these patients, and to take away their ability to see their neighborhood doctors would be a severe blow to their care, not to mention general convenience," the health system said in a statement Friday.
On its website, UnitedHealthcare lists a number of alternative providers, including hospitals operated by UPMC, Penn State Health and Penn Medicine Lancaster General Health.
The insurer covers about 27.3 million people nationwide and had revenue last year of $371.6 billion.

What's the rub: While every contract negotiation is unique, several overarching factors are heightening tensions between insurers and health plans, according to experts in the field.

One of the biggest is that insurers and health systems still tend to approach negotiations as a zero-sum game, according to Alan Cohen, co-founder and chief product officer of Centivo, a Buffalo-based company that assembles provider networks administers health plans for self-insured employers. It competes with insurers like UnitedHealthcare.
If the health system wins, then the insurer and its customers lose, he said. If the insurer wins, then the health system loses.
"The sad part about it is that we're actually all on the same side," Cohen said. "Everybody from employers to health plan administrators to big carriers like UnitedHealthcare to organizations like WellSpan all want to deliver high-quality care in a cost-effective way. But we are stuck in this zero-sum structure."
Cohen noted that the public back and forth between WellSpan and UnitedHealthcare revolves, in part, over costs for procedures.
For years, however, the healthcare industry has been trying to move beyond the so-called fee-for-service model, which rewards higher volumes of care, toward a model in which providers are paid for keeping people healthy, known as value-based care.

What's the trade-off: Under value-based care, health systems sacrifice some revenue from expensive procedures in exchange for sharing in the savings they generate.

For example, if a system can help people with diabetes better manage their conditions, they are less likely to suffer from kidney disease or other complications, such as blindness and foot amputations.
Medicare, the largest payer for medical care in the U.S., has been pushing the model, Cohen said.
In response, providers like WellSpan have fashioned themselves into microcosms of the healthcare industry as a whole. They can treat just about anything, positioning themselves to better address health problems before they worsen and reducing the overall cost of care.
If those systems can attract more patients, they can offset the decline in revenue even as their fixed costs stay the same or go up due to inflation.
In an ideal system, lower-cost providers would, in fact, gain patients, said Cohen, whose company has relationships with Penn Medicine and Lehigh Valley Health Network in Pennsylvania.

Is that what happens: Usually not.

Lower-cost health systems are often placed in the same networks as more-expensive providers under the same volume-based contracts, Cohen said. "A lot of these productive, really efficient health providers are sitting back going, 'Did we make a big mistake doing this? Why don't we just charge high rates?'"
At the same time, insurers are facing pressure from employers -- especially larger companies that fund their own health plans -- to cut costs. That leads insurers to insist on lower charges.
"That's where the negotiating gets to be rough," said John Schneider, CEO of Avalon Health Economics, a consulting firm with offices in Miami and Morristown, New Jersey.
Health systems risk losing patients if they walk away from an insurer. Insurers may worry that employers will drop them if workers lose in-network access to their doctors.
"Whoever prevails is going to be the one who has less to lose, who can live without the other entity," Schneider said.

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Quick takes

WHO'S BUYING: A joint venture between Lancaster-based Benchmark Real Estate LLC and New York-based real estate investor Regal Ventures. They paid $22 million for an industrial complex in Bristol Township, Bucks County, about 22 miles northeast of Philadelphia, according to county deed records. The deal was structured as a condominium transaction, meaning each of the complex's four parcels was recorded as a separate sale.

The 25-acre complex, known as Crownwood Industrial Estates, includes three buildings and a site approved for a roughly 100,000 square-foot Class A industrial structure.
The condo structure of the deal allowed the partnership to turn around and sell one of the existing buildings, a 112,000 square-foot structure, to one of its tenants, Penn Steel Fabrication. The price was $12 million, according to Mike Callahan, vice president of real estate development for Benchmark, which is affiliated with Benchmark Construction.
The other two buildings are a 13,000 square-foot medical building and a 93,000 square-foot industrial building with four tenants.
The partnership is hoping to attract tenants for the approved site before starting construction, said Callahan, who noted there is strong demand in the Philadelphia-area for smaller industrial space.
"Stuff under 200,000 square feet is going quick, and it has a very low vacancy rate," he said.
The partnership hopes to break ground by early 2025, according to Alex Smith, co-founder and managing partner of Regal.
"The Bristol region is ideally located, with access to nearly 2 million people within a 30-minute drive," Smith said in a statement.
Crownwood's seller, STD Associates LP, was represented by Michael Borski and Pat Gilmore of Philadelphia-based The Flynn Company.
The lender for the acquisition was Edgewood Capital in Southport, Connecticut, and the buyers' counsel was Spencer Hoffman of law firm Preti Flaherty.

Crownwood Industrial Estates in Bucks County

WHAT'S CLOSING: Campus Eye Center, an ophthalmology practice with two offices in Lancaster County. The practice notified patients earlier this month that it is shutting down due to the loss of key staff members to retirement and to issues of health and disability.

"Keeping a large specialty practice vibrant and thriving has become increasingly difficult and despite our best efforts and plans, we are unable to continue in practice," Campus Eye staff members wrote in an online letter to patients.
The practice has offices at 2108 Harrisburg Pike in East Hempfield Township and 222 Willow Lakes Drive in West Lampeter Township.
The practice has contracted with a Georgia-based company called Cariend to manage patient medical records over the next seven to 21 years.

WHO'S ASKING: Federal antitrust and transportation regulators. They are seeking public input on the impact of consolidation and anticompetitive conduct on the affordability and availability of air travel. People have until Dec. 23 to submit comments.

Federal agencies aim to identify any barriers to competition in the airline industry following years of mergers and acquisitions.
Over the last 20 years, regulators have cleared a string of deals, including mergers between Continental and United Airlines, Delta Air Lines and Northwest, and Southwest Airlines and AirTran.
But officials have been leerier of late.
The U.S. Department of Justice successfully sued this year to block a merger between JetBlue and Spirit Airlines.
Regulators also managed to impose conditions on the merger between Alaska Airlines and Hawaiian Airlines.

What's the local market: American Airlines is the dominant carrier at Harrisburg International Airport, serving more than half of the airport's passengers in August, according to airport stats.

Delta was second with just under a fifth, followed by Allegiant Air at about a sixth.

WHAT WAS MIXED: Public input during the first public meeting in the lengthy regulatory process involved in the proposed restart of Three Mile Island nuclear plant in Dauphin County. Held Friday by the Nuclear Regulatory Commission, the meeting gave plant owner Constellation a chance to sketch out a timeline and other details associated with the restart, expected in 2028.

The company reviewed the current state of the plant, its future staffing needs and the regulatory hurdles it expects to cross.
During a public-comment segment at the end, supporters praised Baltimore-based Constellation for reviving the plant, its jobs and its energy production.
Critics raised questions about costs and regulatory oversight of the restart -- a relatively novel process for a nuclear reactor -- and they questioned whether nuclear power is truly clean.
Constellation has proposed renaming TMI the Crane Clean Energy Center, after a former CEO. One meeting participant said the plant should more accurately be called the Crane Nuclear Energy Center.

The background: Constellation is proposing to restart TMI's unit 1 and sell the power to Microsoft, which wants carbon-free energy for its data centers.

The unit has been closed since 2019.

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Compiled and written by Joel Berg