Highmark's takeover of failing hospital chain moves forward

Highmark's purchase of West Penn Allegheny Hospital System (WPAHS)--and its $800 million in debt--is almost complete after both organizations signed an agreement to affiliate.

With its takeover of WPAHS, Highmark plans to offer healthcare that focuses on providing quality and efficient service rather than increasing revenue, reports the Pittsburgh Tribune-Review. "This affiliation will provide a unique opportunity to change the way healthcare is delivered in Western Pennsylvania," Highmark CEO Kenneth Melani said.

The payer also plans to add other hospitals and physician practices into an integrated delivery system division it will create. "We are talking to all the players in this market," he said.

Under the new affiliation, the health system will focus on partnering with physicians, reinstating services, establishing a trauma program, and growing specialty services, reports the Central Penn Business Journal.

Melani will remain CEO of Highmark's insurance business and will lead a new parent organization overseeing the insurance and provider divisions.

The deal isn't without certain risk for Highmark, however. WPAHS hasn't had a positive operating margin in at least four years, and it has a pension plan that is $196 million underfunded for more than 11,000 employees, according to the Pittsburgh Business Times.

Additionally, insurance rating agency A.M. Best is reviewing Highmark's finances "with negative implications," notes the Tribune-Review. A.M. Best "has concerns with the integration and the financial viability of WPAHS, its large outstanding debt, as well as WPAHS' troubled financial past."

To learn more:
- read the Central Penn Business Journal article
- check out the Pittsburgh Business Times article
- read the Pittsburgh Tribune-Review articles on the acquisition and A.M. Best's review

Related Articles:
Highmark invests $475M to acquire failing hospital chain
Highmark, UPMC end negotiations as Aetna steps in
Highmark used anti-competitive actions in 'precedential' case