S&P cuts its outlook for Highmark profits to negative
By Alex Nixon
Published: Monday, Jan. 28, 2013, 1:22 p.m.
Standard & Poor's Ratings Services downgraded its outlook on Highmark Inc. on Monday because of the rising costs of acquiring West Penn Allegheny Health System, building an integrated health system and giving rate increases to UPMC.
S&P affirmed its “A” rating of Highmark but dropped its outlook on the state's largest health insurer to negative, from stable, on concern that its profit would drop this year.
“The outlook revision reflects our expectation that Highmark's operating earnings will weaken further in 2013 primarily because of concessionary pricing actions implemented during the company's contentious contract negotiations with UPMC, as well as expenses related to its integrated delivery strategy and preparing for health care reform,” Jon Reichert, S&P credit analyst, said in a statement.
Highmark spokesman Aaron Billger declined to comment.
In its contract extension with UPMC, announced in May, Highmark will raise reimbursement to UPMC by 9.9 percent three times between July 2012 and July 2014, according to documents filed in Allegheny County Common Pleas Court. The extension expires on Dec. 31, 2014.
Highmark's costs for building a health system to compete with UPMC are rising. The insurer said this month it will buy out investors holding West Penn Allegheny bond debt for about $635 million. That cost is on top of $475 million it agreed to pay for the nearly bankrupt operator of five Pittsburgh-area hospitals.
Highmark is awaiting state approval to close the acquisition of West Penn Allegheny.
It plans to buy Jefferson Regional Medical Center in Jefferson Hills and St. Vincent Health System in Erie.
Highmark recently forecast that its net income this year would drop to $106.1 million, down 74 percent from $412.6 million in 2012, according to documents filed with the state Insurance Department this month.
Last week, Moody's Investors Service said it is reviewing “for downgrade” Highmark's credit and financial strength ratings because of the added debt from the bond buyout.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Earnings carry more weight as investors attempt to look past winter
- Wages have soared in Pittsburgh, but economy appears to have stalled
- PPG shareholders vote against proposals; sales, profit see double-digit increases
- NBA player plans Russia’s 1st Hooters
- Emboldened by Italy move, QVC to expand into France
- Consol Energy transitions as leadership changes hands
- Fed Beige Book survey: Growth picks up across most of U.S. but not in Pittsburgh region
- Region’s largest bank PNC posts 7% rise in 1Q profit
- Higher fuel costs help established airlines, hinder startups
- Czech Republic cancels nuclear reactor project with Westinghouse
- Robinson bakehouse invests time, love in artisan products