Highmark urged Pennsylvania insurance regulators to approve its takeover of West Penn Allegheny Health System, arguing the acquisition was needed to more permanently “stabilize the situation” at the financially troubled health system.
West Penn sale detailed
In a new regulatory filing that disclosed details of a definitive agreement announced Nov. 1, Highmark detailed for regulators how the insurer would provide up to $400 million to the health system.
Highmark said $50 million will be awarded to West Penn Allegheny 180 days after the agreement is executed. Two $100 million loans will follow on April 1, 2013, and one year later.
Those sums would follow previous infusions totaling $150 million. Highmark awarded one $50 million loan and another $100 million in grants, including $50 million in June, before the health system closed its books for fiscal 2010. “This intervention, however, only preserved a fragile financial status quo for a limited time,” Highmark said in the regulatory filing.
“Highmark needs to affiliate with WPAHS now to stabilize the situation more permanently and in so doing to preserve WPAHS as an essential choice in the market and as the anchor to a higher-performing network based on the efficient market principles described above: pay for performance, transparency and value-based exchange of services for dollars.”
The $50 million grant in June, along with investment income, helped to erase the system's $51.8 million operating loss for the fiscal year that ended June 30.
Highmark also set conditions on the funding, specifying that it must be used first to absorb operating losses and prevent or cure a default, according to the regulatory filing. Absent operating losses or default, a joint committee of Highmark and West Penn Allegheny will determine how cash will be spent. “We have not defaulted,” said Kelly Sorice, a system spokeswoman said in an e-mail. The 60 days cash on hand in West Penn Allegheny's annual report was “well above the default level,” she said.
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