West Penn, Highmark explore talks
By Luis Fábregas and Alex Nixon
Published: Wednesday, Oct. 10, 2012, 10:56 a.m.
West Penn Allegheny Health System board chairman Jack Isherwood and Highmark Inc. CEO William Winkenwerder spoke by phone on Wednesday for the first time about the break-off of negotiations over the insurer's plan to acquire the financially ailing system.
Isherwood called Winkenwerder, and the two had a cordial conversation, reported West Penn Allegheny spokeswoman Kelly Sorice.
Isherwood said he told Winkenwerder that he would be willing to meet face-to-face with no pre-conditions to get talks going again, and Winkenwerder indicated he would think about it, Sorice reported.
Highmark spokesman Aaron Billger could not confirm the telephone conversation. He issued a statement in which Highmark urges West Penn Allegheny "to change their position and disavow their claim of an affiliation breach, so that we can continue talks regarding a financial restructuring or an alternative proposal."
West Penn Allegheny's board of directors announced Sept. 28 that it was pulling out of Highmark's planned $475 million acquisition, saying the insurer breached their affiliation deal by demanding that the system restructure through bankruptcy.
Highmark officials deny breaching the agreement and have filed a lawsuit in Allegheny County Common Pleas Court.
Highmark officials told more than 75 West Penn Allegheny doctors on Wednesday evening that the state's largest insurer intends to move forward with its plan to build a billion-dollar integrated delivery network to challenge UPMC's dominance in Western Pennsylvania.
John Paul, the Highmark executive leading the insurer's effort to build a competing system, told physicians that West Penn Allegheny remains a key part of that plan, a source who attended the private meeting at the DoubleTree hotel in Green Tree told the Tribune-Review. The source asked not to be identified because of job concerns.
Highmark officials told physicians that their network plans still include a previously announced partnership with Jefferson Regional Medical Center, which had several representatives at the meeting. The Highmark plan calls for a network of medical malls across Pittsburgh and the acquisition of private practice physicians.
"Highmark feels that reducing West Penn Allegheny's debt burden would improve the financial condition," the source told the Trib. "Highmark feels that the insurance department would look at restructuring as something favorable."
The Pennsylvania Insurance Department, which has been reviewing the proposed deal since November, said it "raised significant concerns" about West Penn Allegheny's being able to repay its nearly $1 billion in bond and pension debt.
The affiliation deal's collapse heightened tensions among West Penn Allegheny's physicians and the interim consultants hired by the board to manage the ailing hospital network.
The Trib reported that physician leaders at the system's five hospitals sent a signed letter to Isherwood demanding the board fire interim CEO Keith Ghezzi and his consultant management team. The doctors want more involvement in future negotiations with Highmark.
Dr. Ghezzi, who works for the New York City-based consulting firm Alvarez & Marsal, could not be reached for comment. Three physicians told the Trib that Ghezzi was furious about physicians' comments published in the newspaper and spent a lot of time on Wednesday reaching out to them.
"We continue to meet with physicians on an ongoing basis to provide updates on our plans to develop a new integrated delivery system in the region," Highmark spokesman Michael Weinstein said. "This (Green Tree event) is another one of those private meetings."
Some physicians complain Ghezzi is responsible for steering West Penn Allegheny's board in the wrong direction. They contend Ghezzi wants to stall any potential deals so the consulting firm can continue billing West Penn Allegheny.
Sorice would not disclose how much the system pays Ghezzi and his firm.
Dr. Jack Wilberger, a neurosurgeon at Allegheny General Hospital and member of the West Penn Allegheny board, said outside the hotel meeting that some of the doctors who signed the letter "have been misguided."
"They think we (the board) don't want to talk to Highmark," Wilberger said, "but we've been trying very hard to get back to the negotiating room."
Local health care experts said West Penn Allegheny's board will listen to the complaints from its doctors.
James McTiernan, a health care consultant with Triad USA, Downtown, said doctors have the power to push West Penn Allegheny and Highmark back together.
"The quickest road to the demise of a health system is the loss of doctors. Without doctors there's no patients," McTiernan said.
UPMC is expected to announce on Thursday that it has hired four West Penn Allegheny orthopedic surgeons from its Allegheny Specialty Practice Network.
The four board-certified orthopedic surgeons going to UPMC effective Jan. 1 are Mark Baratz, who specializes in hand and upper extremity surgery with carpal tunnel syndrome expertise; Alan Klein, whose focus is anterior cruciate ligament (ACL) injuries, hip and knee replacement, and foot and ankle injuries; Christopher Schmidt, who focuses on hand and upper extremity with expertise in joint replacement, shoulder conditions, carpal tunnel and arthritis; and Dean Sotereanos, who focuses on hand, elbow, carpal tunnel, shoulder and joint ailments. The switch to UPMC is a homecoming of sorts for the four, who completed surgical specialty training at UPMC early in their careers.
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