West Penn Allegheny Health System ended 2011 with a legal setback and questions about its financial viability.

In December, the Pittsburgh health system lost a bid to keep private the terms of its affiliation with Pittsburgh insurer Highmark, a deal first announced last summer that progressed to a definitive agreement Nov. 1. U.S. District Judge Arthur Schwab ruled Dec. 29 in favor of public access to the deal documents, though he agreed to keep some details sealed. Schwab also noted in the decision that officials had already released many of the terms.

West Penn Allegheny also sought and was temporarily granted approval to keep private additional information on physician compensation and contracts. Meanwhile, the distressed health system's auditors said sustained operating losses, an uncertain outcome for turnaround efforts and approvals required before Highmark could acquire West Penn Allegheny “raise substantial doubt about WPAHS' ability to continue as a going concern.” The auditors' remarks and West Penn Allegheny's financial statements, which reflected a $51.8 million operating loss for the fiscal year that ended June 30, were released Dec. 30.

Officials responded to the news by stressing the $475 million Highmark pledged in grants and loans, which includes $75 million for medical education.

“The audit report underscores the need for expedited review and approval of the Highmark-WPAHS transaction to preserve important community assets and preserve access to excellent healthcare for all residents of Western Pennsylvania,” Dr. Keith Ghezzi, West Penn Allegheny interim president and CEO, said in a written statement.

In the same statement, Ghezzi said the system would postpone its plans for a medical school with Temple University School of Medicine until regulators approve the deal between the health system and Highmark.

The audit followed a downgrade by Fitch Ratings for the system to B+ from BB-, which West Penn Allegheny called “disappointing” in a statement released to investors.

Last week, Highmark and West Penn Allegheny announced a $20 million investment in the system's 300-bed Forbes Regional Hospital in Monroeville, Pa. Highmark said the capital infusion would pay for a new heart surgery operating room, renovation of three floors, new landscaping and signs, and remodeling of a cafeteria, waiting rooms and other visitor areas, and equipment to support the hospital's effort to earn designation as a Level 2 trauma center.

Plans also call for new breast care center in an adjacent medical office building, officials said at a news conference. They also announced a new affiliation agreement with Premier Medical Associates, a multispecialty medical group.

—with Paul Barr and Ashok Selvam