PITTSBURGH - A hospital network is suing its much larger competitor, the University of Pittsburgh Medical Center, and the region's dominant health insurer, claiming they are conspiring to put it out of business through an illegal monopoly.

West Penn Allegheny Health System's suit accuses UPMC of refusing to contract with other health insurance companies at reasonable rates. In return, insurer Highmark pays inflated reimbursements to UPMC's facilities and less to others, putting them at an economic disadvantage, the lawsuit claims.

The arrangement allows Highmark to corner the market on UPMC patients, according to the suit filed Tuesday in U.S. District Court in Pittsburgh. The region's residents have paid higher health care costs as a result, said David McClenahan, West Penn Allegheny's chairman.

UPMC and Highmark each issued statements denying the allegations and saying West Penn is trying to divert attention from its financial difficulties.

West Penn lost $63 million in the fiscal year that ended June 30. The hospital blamed the loss on a $73 million accounting error that overstated its net accounts receivable.

But the lawsuit alleges that UPMC has been scheming since 2002 to eliminate West Penn Allegheny as a hospital competitor and ensure its dominance in Western Pennsylvania.

"In exchange UPMC not only wanted its own bottom line fattened with higher payment rates but also demanded that Highmark join in the campaign to eliminate its sole viable competitor, West Penn Allegheny," the suit said.

UMPC is the region's largest employer, with about 50,000 workers. West Penn is the region's second-largest health system and has just over 13,000 employees.