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The Hospital That Held a City Hostage

The infuriating saga of UPMC, Pittsburgh’s abusive, profit-hungry hospital giant, is a cautionary tale. The lesson? Private economic power must be subjected to democratic control.

UPMC / Twitter

A funny thing happened in July as the Pittsburgh City Council prepared to vote on approval for a planned $2 billion expansion by the University of Pittsburgh Medical Center (UPMC).

Just weeks earlier, the Council had declined to approve the controversial expansion, fiercely opposed by community groups, local activists, and unions, until a community benefits agreement (CBA) was signed. Now they had gotten their wish.

Except the CBA that councilman R. Daniel Lavelle held up on July 31 dealt with none of the demands locals had made at the earlier meeting. In fact, it appeared to have been negotiated overnight, and without community input; some activists only learned about it from the media. Worse, the agreement was just two pages of bullet points attached to a letter from UPMC referencing an earlier agreement. The pages weren’t even signed.

“What I have here is two pieces of paper with bullet points,” councilwoman Deb Gross said at the time. “And there’s no evidence that this is what UPMC is agreeing to.”

Then Lavelle made a curious speech. Referencing the traumatic closure of UPMC’s Braddock Hospital in 2010 and the havoc it had wreaked on the local community, Lavelle warned that another UPMC facility, Mercy Hospital, was “in a conversation of potential closing.”

“Understanding the devastation that happened in Braddock, I decided I could not afford to let that hospital close and that I would need to do whatever was necessary for that hospital to stay open,” he said. He and all but two other council members then voted to let the expansion go ahead as the assembled crowd made its displeasure known.

For many activists, what had happened was clear: UPMC had threatened behind closed doors to shutter the facility if they didn’t get their way, and had produced a scant, non-committal CBA to placate the community. Such suspicions appeared to receive further credence the next day when Pittsburgh mayor Bill Peduto blamed opponents for “putting the existence of Mercy Hospital in jeopardy.”

Whether or not UPMC would have made good on this alleged threat is another story. Shannon Brownlee, senior vice president of the progressive health care think tank Lown Institute, calls the idea “laughable.” Deb Gross, one of the two council members who voted against the approval, says she was “not aware of any concrete plans to close Mercy,” though she “would certainly not put it past UPMC to threaten hospital closures.”

Yet disingenuous or not, such threats work. After the Seattle City Council introduced a new “head tax” on big firms’ employees to deal with the city’s homelessness crisis, Amazon — the largest local non-government employer — protested by ceasing construction on a seventeen-story office tower and threatening to send thousands of jobs elsewhere. The mayor and council quickly repealed the tax.

So when UPMC CEO Jeffrey Romoff declared last year that the health care network “desires to become the Amazon of health care,” those words would come to represent a far more ominous portent than he likely intended.

A Charity Like No Other

The row over the expansion is the latest in a litany of longstanding local grievances against UPMC, an economic juggernaut in the city and state. Its 656 acres and $1.6 billion in total real-estate holdings make it the largest property owner in Allegheny County, the southwestern Pennsylvania county that houses the city of Pittsburgh. With 85,000 employees, UPMC is not only Pennsylvania’s largest healthcare provider, but its largest employer aside from the government (a decade ago, it was Walmart).

UPMC’s 2018 revenue is a projected $20 billion, while in 2016 its CEO, Jeffrey Romoff, earned $6.1 million, just one of the organization’s two-dozen executives who earn at least $1 million and travel on its $51 million corporate jet. The kicker? UPMC is a officially a nonprofit, which means it avoids paying most property taxes, depriving the city of much-needed funds, particularly for its schools.

There are other factors that make UPMC a curious example of a nonprofit. It spends only around 2 percent of its revenues on charity care, for one. There are also few nonprofits that would describe themselves as an “integrated global health enterprise,” running an international network of for-profit health care facilities in places as far afield as Italy and Kazakhstan.

And few nonprofits have expanded as ruthlessly as UPMC has through the decades. Over the course of its first twenty-three years under Romoff, UPMC went from being a federation of six hospitals with fewer than 600 employees to nineteen hospitals with 40,000 employees. Today, it owns forty hospitals.

“That status should not come for free,” says Jennifer Rafanan Kennedy, acting executive director of Pittsburgh United, a labor-aligned activist coalition. “UPMC has not held up their part of the bargain.”

UPMC initially justified its expansion partly on the grounds that increasing its size would give it a stronger bargaining position with health insurers — that is, it would put the hospital in a stronger position to raise prices for its services. In response to the 1995 merger of insurance giants Blue Cross and Pennsylvania Blue Shield, which produced an insurance colossus covering twenty million people in four states and Washington, D.C, UPMC merged with a number of specialty and community hospitals to create the Tri-State Health System, before absorbing five more hospitals in 1996, quickly dominating the Pittsburgh healthcare industry.

But UPMC was also heading off a rival in the Allegheny Health Education and Research Foundation (AHERF), then the largest healthcare provider in Pennsylvania, and one jockeying with UPMC over Pittsburgh’s last remaining city and suburban hospitals. UPMC won out, with AHERF going bankrupt in 1998 in what was then the biggest failure of a nonprofit in US history (AHERF, it turned out, had overstated its assets by $127 million two years earlier).

UPMC was granted a near-monopolistic grip over the city’s health care, with unsurprising results. A 2006 report found that UPMC’s Presbyterian and Shadyside hospitals charged patients far more — between 37 and 92 percent more in the latter case — than did Mercy, which UPMC had yet to absorb at the time. The following year, it got in hot water for charging insurers $135 per flu shot. Nearly a decade later, UPMC would build a hospital less than a mile from one owned by Allegheny Health Network (AHN), a remnant of the collapsed AHERF, receiving criticism for doubling up on services for the sake of squeezing out another rival.

Adding to the sting was that UPMC had been closing hospitals vital for both the care and the economies of local communities, often in poorer neighborhoods. In 2010, it closed its hospital in the low-income community of Braddock, citing annual losses and residents increasingly traveling to other facilities. In one fell swoop, UPMC snatched away both Braddock’s biggest employer and its only dedicated emergency room. It was this closure that councilman Lavelle would cite last July to justify approving UPMC’s expansion without a CBA.

Such a cold-blooded, profit-driven business decision clashed with UPMC’s status as a charitable organization. And as the Pittsburgh Tribune-Review pointed out at the time, the hospital’s annual $4.5 million loss was the same amount as the salary of UPMC’s chief executive alone. Money worries also didn’t stop UPMC from paying $95 million that year for a two-thirds stake in Dublin’s Beacon Hospital, losing more than that amount when it sold the clinic four years later.

UPMC also stepped up its feud with Highmark, with residents caught in the middle of the tug of war between the two corporate giants. Frustrated with what it said was Highmark’s low reimbursement rates, UPMC had started its own health plan back 1997. In 2011, Highmark, in response to a significant rate increase from UPMC, acquired its own hospital system in the form of the AHN.

In turn, UPMC decided to let its contract with Highmark expire, forcing residents to switch insurers if they wanted to continue using UPMC’s now-ubiquitous medical facilities, a move that attracted bipartisan criticism. Ads were taken out. Lawsuits ensued. Multiple attempts at mediation kept the brittle partnership together over the years, but as of today, Highmark enrollees are due to lose their access to the UPMC hospital network by the end of July next year.

All the while, UPMC has carved out a solid reputation as one of the country’s most labor-unfriendly employers. At the same time it was paying dozens of executives more than $1 million each, or about half its yearly charity care, it paid workers poverty wages, pushing them into part-time work and food pantries to survive. According to a 2014 Pittsburgh Post-Gazette report, it paid ordinary workers between 8 and 30 percent less than what they needed for basic expenses like rent and groceries.

Efforts to fight these practices have been resisted by the nonprofit. UPMC has been the subject of several National Labor Relations Board (NLRB) cases, including a 2013 NLRB complaint alleging 80 charges of unfair labor practices revolving around its anti-union efforts, which included firing workers for their unionization efforts. Only a month ago, the NLRB determined that UPMC had broken federal law by barring workers from discussing unionizing in a hospital cafeteria. Just this August, the NLRB issued two rulings about UPMC’s intimidation efforts against union organizers.

At one point, UPMC tried to dodge a legal challenge to its treatment of workers by claiming it was simply a “holding company” that didn’t employ anyone. At the same time, its website proudly touted the large number of people it employed.

By contrast, employees at hospitals belonging to the AHN, UPMC’s longtime rival, have unionized with little trouble.

Four Hours of Fury

It was this tumultuous history that helped turn UPMC’s $2 billion expansion plans into a flashpoint this year.

The opposition, made up of the state’s SEIU Healthcare branch and a coalition of the city’s community organizations, viewed the planned expansion as yet another case of UPMC neglecting local communities in the pursuit of profit. The argued that the new facilities — including what one councilwoman called a “luxury eye-care hospital” — would mostly be used by wealthy patients outside the city, and called for UPMC to invest in treatment for mental health, diabetes, and opioid addiction (Allegheny County’s rate of fatal overdose due to heroin and prescribed opioids is double the national rate).

They also wanted the city to use UPMC’s request for expansion to extract key concessions from the health care behemoth. These included investment in local communities, a higher minimum wage, and an end to union-busting efforts.

The anger boiled over at a four-hour council meeting on July 17, for which 160 speakers registered to attend, mostly to air grievance after grievance with UPMC. One speaker charged that there was nowhere for people to get psychological care in Pittsburgh. Another cited an incident where an undocumented man taking his child to UPMC Children’s Hospital of Pittsburgh was delivered to ICE by the facility’s security.

One man who had retrained as a medical professional following the steel industry’s collapse recounted how he had lost his job at Shady Side Hospital due to UPMC’s cost-cutting. “That pattern continued at almost every hospital that UPMC swallowed up,” he said, calling UPMC a “great white shark that has never met another health care facility it doesn’t want to eat or destroy.”

Low wages were a theme. “The majority of us are paid too little to enjoy the good life in Pittsburgh,” said one speaker, who criticized UPMC’s promise to raise wages to $15 by 2021 — reluctantly agreed to by the health care titan in 2016 after a lengthy fight with the SEIU — because “by the time that happens, the $15 won’t be what it is today.” A Second World War veteran (himself locked out of UPMC because his union health insurance was issued by Highmark) recalled how a UPMC nurse’s aide, upon hearing of imminent food stamp cuts, remarked that she wouldn’t be able to feed her kids.

Another theme was the Highmark situation, as speaker after speaker recounted how UPMC’s decision to sever ties with the insurer had thrown them into sometimes mortal crisis. One speaker explained that his twenty-nine-year-old wife, who had beaten back a rare and very aggressive form of uterine cancer — a “death sentence,” in her words — was now barred from seeing the highly skilled and specialized oncologists who had saved her life unless she paid an extravagant amount, despite an 85 percent chance the cancer would come back within the first two years after treatment. His wife, speaking through tears, explained that “I have no fight left without those UPMC doctors.”

Speakers pressed the council to use its leverage over UPMC. “UPMC needs your approval,” one speaker told council members. “I urge the council to play hardball, and say to UPMC, ‘You are gonna have to give us something we want in order for you to get what you want.’” “It’s gonna be up to council to say, ‘Do we get the deal first,’” said another.

The onslaught seemed to work. The council adjourned the meeting with no vote, a majority of council members refusing to support the expansion without a CBA in place.

“We are employed by you,” said council president Bruce Kraus, as he moved to end the meeting. “Our charge, our call, our duty here is to work in the best interest of you.”

Yet only two weeks later, these hopes were dashed. Councilman Lavelle held up the two unsigned pages of bullet points that would stand in for a real CBA, and alluded to the vague threat of UPMC Mercy closing. All but two of the council members — Deb Gross and Darlene Harris — voted to approve the expansion as the crowd jeered. Lavelle’s statement that he “look[ed] forward to standing with you tomorrow” was met with derisive laughter.

“Amazon is watching”

While UPMC has faced fierce opposition over the years from local activists and even elected officials, it has rarely been held to account.

Locals had vigorously protested UPMC’s decision to close its Braddock hospital back in 2009-10, with hundreds turning up to protest the decision in wet weather. Residents even took UPMC to court as it started demolition, though a county judge threw the suit out.

When UPMC requested that the Allegheny County Council issue more than $1 billion in low-interest bonds on its behalf, protesters had urged the council to use the request as leverage to prevent the hospital closure. The council instead approved it 11-1. And while a local government complaint to the US Department of Health and Human Services succeeded in winning an agreement for UPMC to continue providing health services for the area, that didn’t include a fully operational emergency room, the chief demand made by locals.

In 2013, then-Pittsburgh Mayor Luke Ravenstahl challenged UPMC’s nonprofit status in court, attempting to force it to pay local payroll and property taxes. It was a U-turn from six years earlier, when Ravenstahl had pressured the city council to shield UPMC from a potential change to state law allowing nonprofits to be taxed. UPMC counter-sued, claiming the challenge violated the Fourteenth Amendment’s clauses for due process and equal protection.

A year later, however, the city’s suit was dropped by the new mayor, Bill Peduto, who argued that he would use more diplomatic means to get concessions from UPMC.

“They have, to date, resulted in no improvements of corporate accountability,” says Erin Kramer, a former SEIU organizer and executive director of One Pennsylvania.

As the council mulled whether to approve UPMC’s expansion this year, Peduto issued a statement of support for the project while insisting he was a “longtime and proven supporter of union and worker rights.” After the council approved the expansion, he accused SEIU Healthcare and other protesters of “holding a hospital hostage that is going to cure the blind,” charging that the union had “burned that bridge to the ground between themselves and UPMC.”

“It seems UPMC doesn’t suffer much political pressure,” says councilwoman Gross.

Amazon’s shadow looms over this ongoing conflict. Peduto began courting the corporate juggernaut after it set off gladiatorial competition between the nation’s cities for the privilege of hosting its second headquarters, praising Amazon’s ethos and its supposed compatibility with Pittsburgh. While the details of Pittsburgh’s bid continue to be kept under wraps, in March the city made Amazon’s list of twenty finalists. When the Pittsburgh Federation of Teachers voted to strike in February, Peduto complained that “the image of Pittsburgh would be set back … while we’re in competition with Amazon.” Local activists suspect Peduto’s soft treatment of Amazon is related.

“I think right now that’s the mode he’s in — ‘Amazon is watching,’” says Moshe Marvit, a local labor and civil rights attorney, and fellow at the Century Foundation, a progressive think tank. “They have to know there’s an open-door policy.”

“Accommodation to no one”

The battle between UPMC and Pittsburgh residents is more than the story of one bad actor abusing its nonprofit status. It’s also a real-world case study of the havoc businesses can wreak on residents in their quest for monopoly power.

More starkly, it illustrates what happens when a business becomes so large and powerful that it can push around local communities and elected officials — the product of “not just a desire for unchecked growth, but an expectation for unchecked growth with accommodation to no one,” as Allegheny County controller Chelsea Wagner put it at July’s four-hour hearing.

For many Pittsburgh residents, an unelected entity in the form of UPMC wields a large degree of power over some of the most intimate aspects of their existence, from their employment prospects and how much money they make, to where and whether they can get health treatment.

“I have the right to choose who I wanna vote for, I have the right to choose who I wanna be in my life,” the twenty-nine-year old cancer survivor facing a loss of access to UPMC doctors had told the city council. “But I don’t have the right to choose what hospital or what treatment I wanna get done.”

Shannon Brownlee says such power and unaccountability is particularly typical of hospitals. They’re usually seen as the “good guys” who save lives, are often major employers in a region, and their financial practices and investment decisions are hidden from public view, including how much they assist needy patients and their decisions to build new wings or hospitals.

“All have an impact on the cost and quality of care, and yet these decisions are rarely questioned by the communities that ultimately underwrite them,” she says.

It also has implications for the burgeoning struggle for single-payer health care. Vikas Saini, president of the Lown Institute, says what’s happened in Pittsburgh is a familiar story.

“Hospital consolidation is underway all over the US,” he says. “This has been increasing the pricing power of the hospital sector in their bargaining with insurers, who have also been consolidating.”

Saini says that unless the market model driving hospital behavior right now is replaced with something else, any single-payer plan — including the current version of Bernie Sanders’ Medicare For All bill — risks eventual defeat.

“Without a clear articulation of a path for the hospital sector, political conflict will rise, the affordability of hospital care will be strained, and the political credibility of solutions like Medicare for All will be under threat,” he says.

Meanwhile, local activists are refusing to give up the fight. One activist, Alisa Grishman, plans to challenge Lavelle come 2021, and urges others to run for office.

“The only way to reduce UPMC’s power is to reduce their access to power,” she says.

And if nothing else, UPMC’s actions appear to have galvanized an entire local movement that will outlive this temporary defeat.

“This fight has brought a strong and thriving coalition of Pittsburghers together,” says Rafanan Kennedy. “We are going to continue to let elected leaders, UPMC, and anybody else know that Pittsburgh belongs to our communities, not UPMC.”