UPMC v. Highmark and the Attorney General Redux: Consent Decree, Contract Interpretation

Commonwealth v. UPMC, 39 MAP 2019 (direct appeal)

This fast-track interlocutory appeal is the most recent chapter in the long-running and contentious UPMC-Highmark struggle over access to and payment for care in the Western Pennsylvania health care market, in which the Pennsylvania Attorney General has sought court intervention to assure that Highmark’s insurance subscribers have a sufficient transition and safeguards so that they can adapt to UPMC’s refusal to contract with Highmark to give them access to UPMC’s medical care. The focus of this and earlier litigation has been the proper interpretation of separate but parallel consent decrees entered into July 1, 2014 between the Office of Attorney General and UPMC and the Office of Attorney General and Highmark (the rift is so bitter that UPMC and Highmark refused to sign the same consent decree) to ensure access for Highmark subscribers at in-network rates during a 5-year period of transition to enable the Highmark subscribers to decide whether to remain with Highmark and lose access to UPMC facilities at in-network rates or change insurance carriers in order to have continued access to UPMC facilities. 

In Com. by Shapiro v. UPMC, 188 A. 3d 1122 (Pa. 2018), argued before the Supreme Court a year ago in May 2018, the issue involved the meaning of the consent decree end-date provisions.  The question then was whether the provision that mandates that UPMC will “continue to contract” with Highmark to provide access to UPMC facilities for certain vulnerable populations at in-network rates until June 30, 2019 meant, as UPMC contended, that UPMC could terminate the “contract” involved, a 1999 provider agreement, on December 31, 2018, because the provider agreement provides for a six-month runout period after termination, during which Highmark subscribers would continue to have access to UPMC facilities, thus honoring the “continue to contract” through the June 30, 2019 commitment. Commonwealth Court resolved the conflict by barring UPMC from terminating the provider agreement until the end of calendar year 2019, but precluding Highmark from representing that UPMC is in-network for any part of 2020 based on the six-month runout clause.  The Supreme Court moved quickly to reverse, deciding in July 2018 that the consent decrees’ June 30, 2019 end date was an unambiguous term, and that it would expire as of that date.  PAA reported on Shapiro in the lead up to the May 2018 argument.

Following the Supreme Court’s July 2018 decision in Shapiro, UPMC announced its plans to implement termination of the consent decrees’ transition period, including a directive that all out-of-network patients would be required to pay all of UPMC’s expected charges for non-emergency health care services up-front and in-full before receiving any services from UPMC providers.  In response, consistent with the consent decrees, the Attorney General approached UPMC and Highmark to attempt to gain agreement to modify the consent decrees to extend the transition period beyond June 30, 2019 and make other modifications to accommodate out-of-network patients. When UPMC refused to agree to the proposed modifications, the Attorney General invoked his right under the consent decrees to petition the Commonwealth Court to modify the consent decrees “in the public interest.”

The Attorney General’s resulting petition in the Commonwealth Court to modify the consent decrees that is the basis for the order in the present appeal seeks to modify the consent decrees in various substantive ways, including by extending the modified consent decrees beyond the June 30, 2019 termination date “indefinitely.”  The petition contains four counts, Count I of which seeks modification of the consent decrees to ensure compliance with the charities’ laws.  The Commonwealth Court severed Count I and entertained UPMC’s answer to it, which raised numerous defenses in the nature of preliminary objections.  The Commonwealth Court, per Judge Simpson, overruled all of UPMC’s objections except one:  It held that while the Supreme Court’s decision in Shapiro “did not preclude the filing of a petition to modify” prior to the June 30, 2019 expiration of the consent decrees, Shapiro did hold that the June 30, 2019 end date  was “an unambiguous and material term of the Consent Decree” that could not be modified in the absence of “fraud, accident or mistake,” and that because the Attorney General has not asserted fraud, accident or mistake, the courts lack the power to modify the termination date of the consent decrees.  Slip Op. at 34-35.

The Supreme Court granted expedited interlocutory review of the Commonwealth Court’s April 3, 2019 order.  Appellant Attorney General Shapiro argues: that the Commonwealth Court misread Shapiro and the consent decrees, that the general principles outlined in Shapiro concerning the inability to vary the terms of an agreement absent fraud, accident, or mistake have no application here because the Attorney General is invoking the modification provisions of the consent decrees to ask the court to extend the consent decrees for public interest reasons;  that nothing in Shapiro suggests that the court is powerless to modify the consent decrees by extending them; and that extension through modification is critical because absent extension, UPMC’s demand for up-front and in-full payment will effectively deny access to healthcare to hundreds of thousands of Pennsylvanians who lack the financial wherewithal to satisfy UPMC’s payment terms.  Further, because the June 30, 2019 termination date is now only six weeks away, the Attorney General is requesting the court to extend the consent decrees until the Commonwealth Court resolves the Attorney General’s modification petition on the merits and there is a final unappealable decision.

UPMC argues in response that “modification” as used in the consent decrees is simply not broad enough to encompass elimination of the agreed-upon termination date that is central to a process that always was intended to be a transition period, and that allowing the consent decrees to be extended indefinitely under the guise of “modification” would destroy the very basis for and purpose of the consent decrees.  UPMC also argues that the modifications the Attorney General proposes conflict with federal health care law, and that his characterizations of the consequences of termination are “scare tactics” that do not reflect the reality that patients have voluntarily chosen and had five years to prepare for.  UPMC also vigorously opposes the Attorney General’s request for an extension of the consent decrees’ June 30, 2019 termination date pending final court resolution of the petition to modify, arguing that even minimal adjustment to the June 30, 2019 end date will upset long-settled expectations.

In reply, the Attorney General argues that the guiding principle of the consent decrees is the public interest, that UPMC is a charitable institution that has now decided to place profit over its mission, and that the court’s King’s Bench powers provide ample authority to prevent termination of the consent decrees pending resolution of the Attorney General’s modification petition, “so as to avoid UPMC prevailing, not on the merits, but through attrition.” Reply Br. at 5.

For more information, contact Kevin McKeon or Dennis Whitaker.