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Of Interest

How healthcare providers make, spend, borrow and invest money.
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By Melanie Evans

Blog: Back to court in Pittsburgh. Again.

The three major players in Pittsburgh's healthcare market—West Penn Allegheny Health System, Highmark and the University of Pittsburgh Medical Center—have a combative and litigious history (for a review, see here). Now, the possible breakup of an alliance between West Penn Allegheny and Highmark, an insurer, has landed two of those players back in court.

Highmark said in court filings this week that West Penn Allegheny had no grounds to exit the deal the partners signed almost a year ago. (“It is truly sad that Highmark has taken this step,” West Penn Allegheny responded.)

Under the deal in dispute, Highmark would acquire the health system and West Penn Allegheny would receive desperately needed cash.

Highmark began immediately to pour cash into the struggling system, which has continued to see its operations deteriorate since the deal was announced. West Penn Allegheny lost $87.8 million on operations between June 2011 and March 31, the most recent financial information available. That's compared with a $35.1 million loss for the same nine months the prior year.

Highmark's court records said that without the insurer's financial support, the system would have defaulted on its bonds.

Highmark's court papers demand a refund. “In a flight from reality,” the filing said, West Penn Allegheny Health System “has chosen to take over $200 million of Highmark's money” only to announce the system will seek another partner.

West Penn Allegheny said last week it would walk away from the deal and look for a new suitor after Highmark violated terms of the agreement.

Highmark, in turn, claims in court papers it was West Penn Allegheny, not the insurer, that breached terms of the agreement.

The system and insurer also claim the other has failed to offer valid proposals to remedy West Penn Allegheny's faltering operations.

West Penn Allegheny's chief executive said last week Highmark insisted on bankruptcy but failed to justify the strategy with operating plans.

Highmark's proposals include bankruptcy as an option, the court filing said. Meanwhile, the system has “refused to offer any proposal or take any substantial step to fix its dire financial condition other than to ask and demand that Highmark give it even more money than the hundreds of millions of dollars that Highmark has already paid and is prepared to pay under the agreement.”

You can follow Melanie Evans on Twitter: @MHmevans.

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