West Penn Allegheny picks new chief to finalize Highmark's takeover

| Monday, Nov. 19, 2012, 12:04 p.m.

West Penn Allegheny Health System named board member Paul Dimmick to lead a team to negotiate with Highmark Inc. on finalizing the insurer's takeover of the financially ailing health system.

In a message sent to employees made public on Monday, West Penn Allegheny board Chairman Jack Isherwood said negotiations would “begin in earnest shortly after Thanksgiving.”

“I am pleased to report that lines of communications are open on many levels between the West Penn Allegheny Health System and Highmark,” Isherwood wrote in Friday's memo. “We share a renewed commitment to work cooperatively for the benefit of our organizations and the people of Western Pennsylvania.”

West Penn Allegheny, the second-largest hospital system in Pittsburgh, and Highmark, the dominant health insurer in Western Pennsylvania, restarted discussions last week. Highmark on Nov. 9 won a court order preventing the hospital system from backing out of their year-old deal.

The negotiations are a priority for Highmark, spokesman Aaron Billger said. Leaders of West Penn Allegheny and Highmark met at least twice, he said.

“We both agreed that we would work diligently, and we're glad to see West Penn Allegheny is moving forward in that way,” Billger said.

West Penn Allegheny had accused Highmark of breaking the affiliation agreement by demanding that the health system declare bankruptcy to reduce its $1 billion debt and pension liability. Highmark sued in Allegheny County Common Pleas Court to keep the deal from falling apart.

Highmark plans to make West Penn Allegheny the centerpiece of a $1 billion health system to compete against UPMC, the largest health system in Western Pennsylvania.

Highmark and West Penn Allegheny last week jointly talked with the state Insurance Department, which must sign off on any deal.

That discussion was “to ensure expeditious review and approval of our mutual plans,” Isherwood said. The department previously expressed “significant concerns” with West Penn Allegheny's level of debt.

Isherwood and Dimmick, a former Mellon Financial Corp. executive who is vice chairman of West Penn Allegheny's board, met with Highmark CEO William Winkenwerder and its board chairman, J. Robert Baum, on Nov. 12.

Dan Brailer, another West Penn Allegheny board vice chairman, and four physicians on West Penn Allegheny's board met with Winkenwerder on Thursday to discuss “physician concerns about the affiliation,” Isherwood said.

A group of physicians with the five-hospital network had urged an immediate restart of talks with Highmark after West Penn Allegheny's Sept. 28 declaration that the insurer broke their agreement.

The doctors said the board should fire West Penn Allegheny's interim management team and allow physician representation in the negotiations.

Isherwood said the board received nominations for a physician to be added to the negotiating team and he would announce that person's name soon.

However, the West Penn Allegheny board on Nov. 8 extended its contract with Alvarez & Marsal, a New York consulting firm that is providing executive management for the health system, including interim CEO Keith Ghezzi.

Isherwood said he and Winkenwerder agreed that talks to complete the deal will be “quick, and the process will involve give-and-take on both sides.”

“We have instructed our colleagues to engage in vigorous discussions and problem-solving,” he said.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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