Highmark Blue Cross and Blue Shield's loan in the pending Allegheny hospital sale has a few very long strings attached.
MODERN HEALTHCARE obtained loan documents Friday that reveal that Western Pennsylvania's dominant insurer could take control of the merged Western Pennsylvania Health System-Allegheny Health, Education and Research Foundation if WPHS misses two loan payments.
In addition, the loan documents detail 30-year repayment terms, not a one-year repayment schedule typical of bridge loans.
"Realistically, in the role of lender that's what we consider pretty standard language in terms of prudent financial management," said Highmark spokesman Michael Weinstein.
Last month, Highmark made public a financing package whereby it would lend $125 million to two-hospital WPHS to help the Pittsburgh-based system acquire the four remaining AHERF hospitals, including flagship 569-bed Allegheny General Hospital in Pittsburgh (March 29, p. 2).
At the time, Highmark downplayed its role as financier, saying the money was simply a bridge loan to allow WPHS, which is pledging its net assets of $230 million, to complete the deal.
But John Brouse, president and chief executive officer of Highmark, sent a Feb. 9 letter and term sheet to Charles O'Brien Jr., WPHS president and CEO, outlining 30-year repayment terms and covenants that would authorize Highmark to appoint a majority of the merged system's board if WPHS missed two consecutive loan payments.
Highmark's involvement prompted competing providers to file antitrust complaints with state and federal agencies.
At deadline, WPHS and AHERF had not reached a definitive merger agreement, although a signed pact is expected shortly.
Nancy Grover, a WPHS spokeswoman, declined to comment on whether the loan terms with Highmark would be changed as part of a definitive agreement.
The two sides hope to close the sale by May 31.
Under the closely guarded terms of WPHS' original offer, the system would buy the AHERF hospitals by assuming their $495 million in debt.