Sunday, October 21, 2012

Isn't Pennsylvania a commonwealth, too?

Watching hospitals and health plans in West Pennsylvania from all the way in Boston can be confusing.  After reading this article in Pittsburgh Post-Gazette, "Commentary says Highmark-West Penn deal not breached", I asked a knowledgeable colleague to summarize the recent events in easy-to-follow term.  Here goes:

What a ruckus! Ok, let me try to lay out Highmark/West Penn 101:

Highmark wants to form a $1 billion integrated delivery system to compete with UPMC (imagine Partners with a big health plan). On 10/31/2011, signs affiliation agreement with West Penn.

UPMC refuses to renew 10 year contract with Highmark (end date June 2012) because Highmark is now a competitor.

Long story, they make nice and renew thru Dec 2014, albeit at higher prices paid to UPMC by Highmark.

West Penn continues to lose $, even with Alvarez & Marsal running it. Highmark CEO gets himself fired. New CEO takes harder look at proposed investment. Either suggests or demands (depending on which side is telling it) that West Penn restructure its debt through Chapter 11.

West Penn takes this as breach of affiliation agreement by Highmark, says it is free to look elsewhere for partner.

Highmark says, "No you don't!" and sues. Hearing is Oct 25 & 26.

That is basically *what* happened. The Why is a whole other ball game, ditto the What Next.


Susannah said...

Nice piece, Paul.
If your readers would like more details, I can refer them to The Bond Buyer (the daily paper for the municipal finance world),, where today's lead story is about West Penn Allegheny. You need a subscription to read most of the articles, but this piece is open to anyone to read. As I have been known to say in other contexts, "You can't make this stuff up."

Anonymous said...

Isn't that how Steward took over one of its hospitals - had it file for bankruptcy to conveniently get rid of its debt before Steward took over?