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Senators urge Corbett to spare small hospitals if Highmark acquisition approved

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Friday, April 19, 2013, 12:01 a.m.

A group of state senators from Western Pennsylvania is calling on Gov. Tom Corbett to protect the region's small hospitals if his administration approves Highmark's bid to acquire West Penn Allegheny Health System.

In a letter on Wednesday, which was obtained by the Tribune-Review, the senators expressed concern that Highmark would shift patients away from community hospitals to boost West Penn Allegheny's troubled finances.

“Approval of the acquisition by your administration should include safeguards to ensure WPAHS is not saved through the demise of community hospitals,” read the letter, which was signed by Sens. Don White, R-Indiana, chairman of the Senate Banking and Insurance Committee; Kim Ward, R-Hempfield; Elder Vogel, R-Butler County; and Robert Robbins, R-Mercer.

The letter was prompted by reports released last week from consultants hired by the state Insurance Department to review Highmark's proposed $1.1 billion acquisition of West Penn Allegheny.

According to the consultants, seven community hospitals could lose an undisclosed number of patients to West Penn Allegheny. Now facing declining patient volumes and slim to negative profit margins, further loss of patients could be devastating, experts said.

“Whatever Highmark takes out of the community hospitals will make an already bad situation worse,” said Stephen Foreman, an associate professor of health care administration at Robert Morris University.

Highmark has argued that it can turn around West Penn Allegheny's finances by convincing tens of thousands of patients a year to choose West Penn Allegheny instead of UPMC, while leaving smaller hospitals unharmed.

Highmark CEO William Winkenwerder, speaking to reporters on Thursday, said the state's largest health insurer has no intention of hurting community hospitals.

Winkenwerder said he has told the region's community hospitals: “We want to support you. We want you to be successful.”

The Insurance Department consultants suggested otherwise.

“It is likely that Highmark's success in shifting inpatients to WPAHS will also result in a loss of inpatient volume at community hospitals,” said Compass Lexecon, a Chicago consulting firm.

“Most of these community hospitals already have low utilization rates,” the report continued. “Any further loss would exacerbate these low utilization levels and could result in significant financial issues for these hospitals.”

The report names seven hospitals: Butler Health System, St. Clair Hospital in Mt. Lebanon, Excela Health's hospitals in Greensburg and Latrobe, Heritage Valley Health System's Sewickley hospital, Uniontown Hospital and Washington Hospital.

The specific numbers of patients were redacted in the report, angering Ward, who held a hearing last year in Westmoreland County in which Highmark executives testified that the company had no intention of taking patients from community hospitals.

“The really disheartening part of this is not only did they say it wouldn't happen, and this report shows that they think it will happen, but they redacted the numbers,” Ward said. “If they have nothing to hide, unredact those numbers and let us see them.”

Insurance Department spokeswoman Melissa Fox said on Thursday that the department had not reviewed the letter. She also explained that the numbers were redacted because they are considered proprietary information.

Corbett had not seen the senators' letter as of Thursday, spokeswoman Kirsten Page said.

Officials with Greensburg-based Excela Health, which owns three hospitals in Westmoreland County, were “surprised” to learn Highmark expected to take patients from Excela, given the insurer's pledge during Ward's hearing last summer.

“Two of our hospitals were called out by name as potential sources of admissions. We are obviously concerned,” spokeswoman Jennifer Miele said. “We will compete. We are committed to the residents and employers in Westmoreland County. We will continue to provide a high-quality, lower-cost alternative to Pittsburgh hospitals.”

Excela reported a $7.2 million loss from operations for the six months ended Dec. 31 as patient revenue declined, according to its most recent financial statements.

Beaver-based Heritage Valley Health System declined to comment. Its most recent financial statements show a loss from operations of $5.9 million for the six months ended Dec. 31.

Officials with the other named hospitals also declined to comment.

UPMC spokesman Paul Wood said patients will have to come from community hospitals because UPMC plans to compete fiercely to hold onto its patients.

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

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