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Of Interest

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By Melanie Evans

Blog - West Penn Allegheny's latest losses: An update

West Penn Allegheny Health System—the distressed partner in a contentious and closely watched healthcare acquisition deal—posted another operating loss for the first three months of its fiscal year.

West Penn Allegheny, a Pittsburgh hospital operator with deteriorating finances, reported an operating loss of $28.3 million on revenue of $378.2 million for the three months that ended in September. That's more than the system lost during the same period the prior year ($27.1 million on revenue of $370.5 million).

The health system's poor financial health has strained talks (nearly to the breaking point) between West Penn Allegheny and Highmark, the Pittsburgh insurer that agreed more than a year ago to acquire the system. A dispute over how to address West Penn Allegheny's finances landed in court in September. A judge sided with Highmark after West Penn Allegheny balked at a proposed debt restructuring by trying to break off the deal.

West Penn Allegheny lost some business to its rival, the University of Pittsburgh Medical Center, which contributed to a drop in the number of hospital discharges in July, August and September compared with the same three months in 2011, the newly released financial statements said (PDF).

An increase in volume from the February reopening of Western Pennsylvania Hospital's emergency room and some acute-care services did not fully make up for the lost market share and a shift in care out of the hospital, West Penn Allegheny said. Overall, its hospital discharges were down 2%.

Revenues were up 2.1% compared with the same period a year ago. Expenses increased 2.7% from the first quarter of 2011, not including restructuring costs.

Finally, West Penn Allegheny's readily available cash—which has been bolstered by an infusion of $200 million from Highmark—was enough to cover its operating expenses for 55 days.

You can follow Melanie Evans on Twitter: @MHmevans.

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