Insurer Aims to Control Costs by Purchasing Hospital Chain

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Controlling overutilization of medical services — particularly costly services such as medical imaging — is something everyone seems to agree on but no one seems able to do under the fee-for-service system.

In what could be a model for others, Highmark Inc., a non-profit Pittsburgh-based insurer, is attempting to solve this problem by acquiring the second-largest hospital chain in its region, the Wall Street Journal reports.

imageUnder the proposed plan, Highmark will provide as much as $475 million to the struggling five-hospital West Penn Allegheny Health System. The hospital chain has been steadily losing money for five years and is now $800 million in debt, according to the Wall Street Journal.

State and federal regulators must of course approve the plan, before it can move forward, but other systems that blur the line between payor and provider have been allowed. One of the most notable examples is Kaiser Permanente in California. Kaiser is often held up as a model for controlling costs in health care.

Read the Wall Street Journal article. Read the press release.—Lena Kauffman