High­mark takes on West Penn

In­surer aims to turn around strug­gling sys­tem

Modern Healthcare - - THE WEEK IN HEALTHCARE - Melanie Evans

Penn­syl­va­nia in­surer High­mark last week ad­vanced $100 mil­lion to ex­ec­u­tives who say they can turn around a fal­ter­ing turn­around at West Penn Al­legheny Health Sys­tem. The five-hos­pi­tal Pittsburgh sys­tem, bur­dened with debt, has strug­gled and failed to earn a profit on op­er­a­tions in re­cent years, with its most re­cent an­nual op­er­at­ing loss to­tal­ing $51.8 mil­lion. Now High­mark, which al­ready poured $50 mil­lion into West Penn Al­legheny in June, is gam­bling that new lead­er­ship and a new turn­around strat­egy backed by the in­sur­ers’ cash can re­verse the sys­tem’s slide.

The lat­est cash in­fu­sion came as the or­ga­ni­za­tions said they had reached a de­fin­i­tive agree­ment and urged reg­u­la­tors to quickly ap­prove the deal so that re­struc­tur­ing plans would not be de­layed and uncer­tainty among doc­tors and pa­tients would not be pro­longed. The plans call for a new not-for-profit named High­mark that would oper­ate the in­surer and the health sys­tem.

“We know that these re­views will be thor­ough, but we also feel that we have a com­pelling story and there are more rea­sons we can list to go for­ward with this as soon as pos­si­ble,” Robert Baum, chair­man of High­mark, told re­porters.

The plans out­lined last week would re­verse some re­struc­tur­ing moves adopted un­der Dr. Christo­pher Olivia, the health sys­tem’s chief ex­ec­u­tive who stepped down in June when the deal with High­mark was an­nounced.

The emer­gency room at 500-bed Western Penn­syl­va­nia Hos­pi­tal, which closed at the be­gin­ning of the year, will re­open and some ser­vices will be re­stored, said Dr. Keith Ghezzi, a man­ag­ing di­rec­tor with the turn­around firm Al­varez & Marsal, who was named in­terim chief ex­ec­u­tive for the sys­tem.

West Penn Al­legheny launched a turn­around ef­fort in July 2008 af­ter the sys­tem closed its books on the prior fis­cal year with an $88.8 mil­lion op­er­at­ing loss. Im­prove­ment the next year did not leave the sys­tem prof­itable but shrank op­er­at­ing losses to $38.5 mil­lion (See chart).


Speak­ing at the news con­fer­ence an­nounc­ing the deal, Me­lani, far left, said the or­ga­ni­za­tion is seek­ing con­tracts, joint ven­tures or merg­ers with other providers.

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