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West Penn Allegheny Health 'moves on' from Highmark deal

- Last modified: September 28, 2012 at 11:58 AM

West Penn Allegheny Health System announced this morning that it notified Highmark it is no longer bound by its affiliation agreement and is therefore exploring new options for its future direction.

A WPAHS news release says Highmark has breached the November 2011 affiliation agreement "by its unequivocal position that Highmark will not close the transaction set forth in the agreement, even if the Pennsylvania Insurance Department approves the deal. Moreover, despite earlier assurances to the contrary, Highmark has specifically demanded, among other things, that WPAHS restructure through bankruptcy."

Highmark issued its own news release, saying it "categorically denies the claim by WPAHS that Highmark has breached the affiliation agreement between us."

"Highmark continues to believe that an affiliation between Highmark and WPAHS is in the best interests of both parties, and more importantly of the entire community," Highmark said. "We have been working in good faith with WPAHS to move forward our proposed affiliation in a way that creates a strong foundation for success. We believe that we have made substantial progress in this regard, especially in recent weeks."

Jack Isherwood, chairman of WPAHS's board of directors, said Highmark remains an important partner in the delivery of health care and WPAHS is open to new discussions with the insurer about better alternatives to bankruptcy, but WPAHS needs to move forward in exploring all options available to it.

Bankruptcy, Isherwood said, "is not the preferred course for the organization since it may cause harm to the health system, its many employees and the community."

Isherwood also cited disagreements about payment rates and said Highmark identified bond debt as a key financial hurdle to finalizing the affiliation.

"In fact, the system's debt level has not changed since the affiliation agreement was signed, except for the addition of loans from Highmark that were part of the affiliation agreement," the release said.

Keith T. Ghezzi, interim president and CEO at WPAHS, cited several other developments that Highmark initiated during the past year that negatively affected WPAHS, including extension of the UPMC contract plus the addition of UPMC East; the abrupt change in Highmark leadership in April 2012; and Highmark's failure to generate the volume increases that Highmark projected in the Pennsylvania Insurance Department filing in November 2011.

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