Cases & Deals

UPMC awarded summary judgment against Highmark in claims concerning federal sequestration cuts

Client(s) University of Pittsburgh Medical Center (UPMC)

Jones Day client University of Pennsylvania Medical Center (UPMC) prevailed on claims that health insurer Highmark Inc. breached contracts with UPMC for the provision of health care services to subscribers of Highmark's Medicare Advantage plans. The dispute stemmed from federal budgetary cuts implemented pursuant to the Budget Control Act of 2011 and American Taxpayer Relief Act of 2012. Those cuts -- commonly known as sequestration -- required an across-the-board 2% reduction in federal Medicare payments, including government payments to private insurers like Highmark that market Medicare Advantage plans to individuals. Sequestration did not require Medicare Advantage insurers to pass these cuts on to health care providers. Nevertheless, Highmark announced that in light of the federal sequester, it would cut all of UPMC's Medicare Advantage payments by 2% beginning in 2014. Jones Day filed a lawsuit on behalf of twelve UPMC hospitals and quickly moved for summary judgment, arguing that the parties' contracts did not permit Highmark to make these unilateral cuts. Following oral argument with a two-judge panel, the court issued a reasoned opinion granting summary judgment in favor of UPMC's hospitals on December 22, 2016. The court adopted UPMC's interpretation that the parties' contracts unambiguously prohibited Highmark from unilaterally reducing UPMC's reimbursements and ordered the parties to meet-and-confer on a calculation of damages.

UPMC Altoona v. Highmark, Inc., Civil No. 2016-00488 (Ct. C.P. Cumberland Cty., Pa.)