West Penn Allegheny Health System Pulls Out of Highmark Deal

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The proposed affiliation between financially stressed West Penn Allegheny Health System (WPAHS) and Pittsburg-based insurance provider Highmark Inc. that set off a legal fight between Highmark and WPAHS competitor the University of Pittsburgh Medical Center (UPMC) may not happen after all.

At a news conference Friday, WPAHS board chairman Jack Isherwood stated that WPAHS was pulling out of the deal because Highmark breached the agreement by insisting that WPAHS file for bankruptcy before the two organizations joined. WPAHS has an estimated estimated $800 million debt that Highmark does not want to become responsible for.

At the news conference, Isherwood said that filing for bankruptcy could hurt the health system, its patients and its employees. Highmark knew the level of debt WPAHS had when the two organizations agreed to affiliate back in 2011 and WPAHS has not increased its debt since that time, he said.

For its part, Highmark says it did not break the agreement and continues to believe that the affiliation, which is under review by the state insurance commissioner, is in the best interest of all involved. It would preserve WPAHS as a strong competitor to UPMC, fostering competition and choice for patients. (Read its statement here.)

However, at least one industry watcher has suggested that darker forces may have been at work. In an interview with the local Pittsburgh National Public Radio (NPR) news station, Pennsylvania State Senator Jim Ferlo said that he was concerned the whole process was a Highmark "ruse" to get leverage in its negotiations with UPMC.

"The facts are clear," he told the radio station. "Highmark signed a contract extension with UPMC for preferential rates, low-balled West Penn on the rates it was willing to pay their ostensible partner, and then changed the nature of the Affiliation Agreement by demanding a bankruptcy proceeding. This appears to be a process which was rigged simply to maintain a relationship with UPMC that provides both with unfair market dominance and hurts Southwest Pennsylvanians."

For more on why the Highmark-WPAHS saga matters to diagnostic imaging providers, read "When Elephants Dance" by Curtis Kauffman-Pickelle.