West Penn sys­tem ends 2011 on sour note, and other news

West Penn faces op­er­at­ing losses, le­gal set­back

Modern Healthcare - - EDITORIAL MODERN HEALTHCARE - Melanie Evans

West Penn Al­legheny Health Sys­tem ended 2011 with a le­gal set­back and ques­tions about its fi­nan­cial vi­a­bil­ity. In De­cem­ber, the Pittsburgh health sys­tem lost a bid to keep pri­vate the terms of its af­fil­i­a­tion with Pittsburgh in­surer High­mark, a deal first an­nounced last sum­mer that pro­gressed to a de­fin­i­tive agree­ment Nov. 1. U.S. District Judge Arthur Schwab ruled Dec. 29 in fa­vor of pub­lic ac­cess to the deal doc­u­ments, though he agreed to keep some de­tails sealed. Schwab also noted in the de­ci­sion that of­fi­cials had al­ready re­leased many of the terms.

West Penn Al­legheny also sought and was tem­po­rar­ily granted ap­proval to keep pri­vate additional in­for­ma­tion on physi­cian com­pen­sa­tion and con­tracts. Mean­while, the dis­tressed health sys­tem’s au­di­tors said sus­tained op­erat- ing losses, an un­cer­tain out­come for turn­around ef­forts and ap­provals re­quired be­fore High­mark could ac­quire West Penn Al­legheny “raise sub­stan­tial doubt about WPAHS’ abil­ity to con­tinue as a go­ing con­cern.” The au­di­tors’ re­marks and West Penn Al­legheny’s fi­nan­cial state­ments, which re­flected a $51.8 mil­lion op­er­at­ing loss for the fis­cal year that ended June 30, were re­leased Dec. 30.

Of­fi­cials re­sponded to the news by stress­ing the $475 mil­lion High­mark pledged in grants and loans, which in­cludes $75 mil­lion for med­i­cal ed­u­ca­tion.

“The au­dit re­port un­der­scores the need for ex­pe­dited re­view and ap­proval of the High­MARK-WPAHS trans­ac­tion to pre­serve im­por­tant com­mu­nity as­sets and pre­serve ac­cess to ex­cel­lent health­care for all res­i­dents of Western Penn­syl­va­nia,” Dr. Keith Ghezzi, West Penn Al­legheny in­terim pres­i­dent and CEO, said in a writ­ten state­ment.

In the same state­ment, Ghezzi said the sys­tem would post­pone its plans for a med­i­cal school with Tem­ple Univer­sity School of Medicine un­til reg­u­la­tors ap­prove the deal be­tween the health sys­tem and High­mark.

The au­dit fol­lowed a down­grade by Fitch Rat­ings for the sys­tem to B+ from BB-, which West Penn Al­legheny called “dis­ap­point­ing” in a state­ment re­leased to in­vestors.

Last week, High­mark and West Penn Al­legheny an­nounced a $20 mil­lion in­vest­ment in the sys­tem’s 300-bed Forbes Re­gional Hos­pi­tal in Mon­roeville, Pa. High­mark said the cap­i­tal in­fu­sion would pay for a new heart surgery op­er­at­ing room, ren­o­va­tion of three floors, new land­scap­ing and signs, and re­mod­el­ing of a cafe­te­ria, wait­ing rooms and other vis­i­tor ar­eas, and equip­ment to sup­port the hos­pi­tal’s ef­fort to earn des­ig­na­tion as a Level 2 trauma cen­ter.

Plans also call for new breast care cen­ter in an ad­ja­cent med­i­cal of­fice build­ing, of­fi­cials said at a news con­fer­ence. They also an­nounced a new af­fil­i­a­tion agree­ment with Premier Med­i­cal As­so­ci­ates, a mul­ti­spe­cialty med­i­cal group.

—with Paul Barr and Ashok Selvam

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