Modern Healthcare - - REGIONAL NEWS - — Me­lanie Evans

High­mark’s re­vised plans to ac­quire the fal­ter­ing West Penn Al­legheny Health Sys­tem would push the Pitts­burgh in­surer’s cost to launch an in­te­grated de­liv­ery net­work to more than $1.6 bil­lion, new reg­u­la­tory fil­ings show. The in­surer, which first filed plans for the deal with state in­surance reg­u­la­tors in Novem­ber 2011, said in a new fil­ing that High­mark would bor­row the $600 mil­lion needed to buy out in­vestors in West Penn Al­legheny’s bonds. Ma­jor bond­hold­ers agreed to sell the bonds at a loss, High­mark paying 87.5 cents on the dol­lar for the debt. High­mark plans to hold onto the bonds un­til West Penn Al­legheny re­turns to tax-ex­empt bond mar­kets for fi­nanc­ing to buy back the debt. West Penn Al­legheny, also based in Pitts­burgh, has seen its spec­u­la­tive grade credit rat­ing fall in re­cent months as its op­er­at­ing losses con­tinue. The sys­tem lost $112.5 mil­lion on op­er­a­tions with rev­enue of $1.6 bil­lion in its last fis­cal year, which ended June 30, its unau­dited fi­nan­cial records show. High­mark has al­ready poured $200 mil­lion into West Penn Al­legheny in less than a year, and the sys­tem is set to re­ceive $75 mil­lion when the deal closes and could see an­other $200 mil­lion in loans. High­mark also said it would pay out $10 mil­lion to West Penn Al­legheny each of the next five years “as part of its provider rate ne­go­ti­a­tions,” ac­cord­ing to the lat­est fil­ing. The in­surer also has com­mit­ted $525 mil­lion to its plans for an in­te­grated net­work, the Penn­syl­va­nia In­surance De­part­ment said in a let­ter ac­knowl­edg­ing High­mark’s lat­est plan. The plan “sig­nif­i­cantly changes the level of risk and the trans­ac­tion is now ma­te­ri­ally dif­fer­ent than what was pre­sented” in Novem­ber 2011, the in­surance de­part­ment said.

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