Independence Blue Cross' contract offer to Tower Health on Friday, the day Tower completed its acquisition of Brandywine Hospital, Chestnut Hill Hospital, Jennersville Regional Hospital, Phoenixville Hospital, and Pottstown Memorial Medical Center, contained what was effectively a poison pill, Clint Matthews, president and chief executive of Tower Health, said Monday.

"The issue that has come between us is the clause that we would not compete with a health plan" in territory served by IBC, Matthews said.

Clint Matthews is president and chief executive of Tower Health, which on Friday completed its acquisition of five hospitals from Community Health Systems Inc. and landed in a contract dispute with Independence Blue Cross.
Tower Health
Clint Matthews is president and chief executive of Tower Health, which on Friday completed its acquisition of five hospitals from Community Health Systems Inc. and landed in a contract dispute with Independence Blue Cross.

Agreeing to the non-compete clause would have blocked Tower, which has changed its name from Reading Health System, from also selling health insurance plans in Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties. The health system has a joint venture with UPMC Health Plan, a unit of the University of Pittsburgh Medical Center, to sell coverage.

Donna Farrell, a spokeswomen for Independence, said Monday that the Philadelphia company is not trying to block competition. But, she added, "We had no interest in being forced into supporting it with our tools, capabilities, data or revenue."

"Independence has no incentive to make it any easier for UPMC's health plan to gain a foothold in Southeastern Pennsylvania," said Stuart H. Fine, director of the health policy and management graduate program at Temple University's College of Public Health.

The result of the dispute is that the five hospitals are now out-of-network under Independence Blue Cross plans, potentially disrupting care for 120,000 IBC beneficiaries who use those hospitals, though during a grace period of at least 30 days Independence will provide coverage at the new Tower facilities at in-network levels.

Emergency care is also covered under in-network terms.

The skirmish could be the start of a protracted war for market share between Independence and UPMC, which is aggressively expanding across Pennsylvania.

"I think it's a very significant development," said Daniel M. Grauman, chief executive of Veralon, a Philadelphia health-care consulting firm. "We have all been speculating about UPMC and Reading and what the implications are for the eastern part of the commonwealth and notably the Southeastern Pennsylvania and Philadelphia market."

Independence has limited options, he said.

"While they don't like it, they're not happy that this is a path for a very formidable competitor into the Southeastern Pennsylvania market, IBC's core territory, I don't know if they can prevent it. Obviously, they are trying to make it more difficult and create barriers to entry," Grauman said.

Meanwhile, patients are facing a time of uncertainty and confusion. Claire Gawinowicz of Oreland, a patient at Chestnut Hill Hospital, said in an email Monday that the customer-service person she reached at an Independence hotline "read me the exact email that I received from Blue Cross" and suggested that she call her doctors.

"They don't know what's going on either! They said they are totally scrambling. This is outrageous! Why is no one helping us! It's chaos," Gawinowicz said.

Independence defended its performance.

"We feel confident that our customer-services team is working closely with our members to help them get the information and the care they need, when they need it, and with as little disruption as possible" Farrell said. "However, because of the short time frame we have had to work with, we may be still gathering answers to some member questions."