Penn State Health and Highmark Health announced Friday that they have reached an agreement for a strategic partnership.
Highmark Health, the nation’s largest health insurance provider, will take a minority stake in Penn State Health and provide funding toward an anticipated $1 billion investment in developing and expanding the health care system, according to a release from the providers.
Penn State Health is a nonprofit umbrella company that includes the Milton S. Hershey Medical Center as well as the St. Joseph’s system in Reading, among others.
“This exciting partnership is a commitment by our organizations to ensure that health care delivery in our region remains patient-focused, enhances overall health and wellness and creates increased opportunity for collaboration with community physicians,” said Dr. A. Craig Hillemeier, dean, Penn State College of Medicine; chief executive officer, Penn State Health; and senior vice president for Health Affairs, Penn State.
“This is a game changer,” said David Holmberg, president and CEO, Highmark Health. “We want to collaborate with forward-thinking partners who, like us, are committed to creating a positive health care experience for members and patients. Penn State Health shares this vision and, together, we’re going to lead the change for a better model of health care in the heart of Pennsylvania.”
Highmark Health will occupy three of the 15 seats on Penn State Health’s board of directors, according to the release.
The partnership will not be exclusive — Penn State Health will be free to contract with other health insurers and will keep its current agreements. Likewise, Highmark Health will not be changing its agreements with hospitals and providers outside the Penn State Health system, and will still pursue future contracts with them.
The companies described the partnership as a “value-based approach” that will “reimburse health care providers for the quality of care they provide rather than for the volume of services, as part of a strategy to reform how quality health care is delivered and paid for.”
Highmark officials have stressed the importance of performance-based contracts with providers as a way to control health insurance costs. The new strategic partnership will involve the “exploration and development of innovative, patient-focused co-branded health care insurance products,” according to the release.
The partnership between Highmark Health and Penn State Health comes less than a year after PinnacleHealth and the University of Pittsburgh Medical Center announced a merger, which was approved and finalized in September.
This also involved UPMC-Pinnacle’s purchase of several hospitals in the Midstate, including the former Carlisle Regional Medical Center, now known as UPMC-Pinnacle Carlisle.
UPMC, which owns much of the hospital infrastructure in western Pennsylvania and offers its own insurance plans, is Highmark’s major rival in the Midstate and Pittsburgh metro regions.
Highmark offers insurance through Highmark Health, but also owns hospitals in the Pittsburgh area under the banner of Allegheny Health Network. Highmark also announced this year that it will pursue a joint venture with Geisinger for a new health care campus in the Montoursville area.