Blog: A clock on West Penn Allegheny
New court records in the disputed breakup of West Penn Allegheny Health System and Highmark suggest that the system's continued financial distress left the insurer with a nagging sense of buyer's remorse.
Highmark, which last year agreed to acquire West Penn Allegheny for $400 million in grants and loans and another $75 million commitment to medical education, presented the health system in August with analysis “suggesting that Highmark is overpaying for West Penn Allegheny,” according to the health system's latest court filings.
The pair ended up in court this month after Highmark sued to stop West Penn Allegheny from looking for a new buyer. West Penn Allegheny said in late September it would seek a new buyer after Highmark demanded new terms and insisted the system restructure its debt in bankruptcy.
The system must be allowed to find a new buyer—and access to capital—quickly in order to survive, West Penn Allegheny said in court records filed this week.
Highmark “plans to hold West Penn Allegheny hostage,” the system said, “…to deplete its cash reserves until either it agrees to the terms of a modified transaction mandated by Highmark or it has no choice but to declare bankruptcy.”
The insurer responded in a statement by urging West Penn Allegheny to return to talks “regarding a financial restructuring or an alternative proposal” to address regulatory concerns about the system's financial condition. “We remain firmly committed to an affiliation,” the statement said.
Results for West Penn Allegheny's most-recent fiscal year, which ended June 30, are not yet available. The system, which saw already weak operating performance further deteriorate during the first nine months of the year, had enough cash in reserve to operate for 50 days as of the end of March, its financial records show.
You can follow Melanie Evans on Twitter: @MHmevans.