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Vital Signs

The Healthcare Business Blog

Highmark lays off workers, eliminates positions at West Penn

By Melanie Evans

Highmark's turn to try to stanch losses at Pittsburgh's West Penn Allegheny Health System has begun.

Roughly 260 workers at the health system were laid off today and another 200 vacant jobs were eliminated. The four-hospital system, the hub of Highmark's new eight-hospital Allegheny Health Network, has hemorrhaged cash and lost patients in recent years. Now the system must shrink accordingly, said Dan Laurent, an Allegheny Health Network spokesman.

“We have to establish a workforce that reflects the volume we have,” he said.

Highmark—one of the largest U.S. insurers—acquired the failing health system for $1 billion in May and pledged to revitalize West Penn Allegheny by capitalizing on the union of health insurance, hospitals and doctors in one network. The strategy holds promise, but also risk. Success will depend on whether the company can more closely coordinate medical care to lower costs and improve quality.

Highmark faces a daunting task. Attempts to earn an operating profit at West Penn Allegheny have failed every year but one since 1999, say analysts with Moody's Investors Service. Operating losses mounted for the first nine months of the fiscal year to $99.1 million on revenue of $1.1 billion. Meanwhile, the system's larger, stronger rival in Pittsburgh's competitive healthcare market (UPMC) finished the same period with operating profit of $146 million on revenue of $7.6 billion.

Layoffs will leave West Penn Allegheny with 10,300 workers.

Laurent said jobs were cut across the system, executives included, but officials sought to minimize cuts to employees who care for patients. The Allegheny Valley Hospital CEO was laid off and his job eliminated to streamline management, Laurent said. The same was true for the chief operating officer and chief nursing officer at Forbes Regional Hospital.

Other turnaround initiatives underway aim to cut West Penn Allegheny's operating costs and bolster its revenue, in part though changes to its billing and collections and efforts to win loyalty from patients.

West Penn Allegheny's fiscal year ended June 30, and the financial statements are not yet available.

Laurent said no further significant layoffs are currently planned.

Follow Melanie Evans on Twitter: @MHmevans

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