West Penn Allegheny losses rise 62%
By Alex Nixon
Published: Tuesday, Oct. 29, 2013, 12:01 a.m.
The financial picture got bleaker at West Penn Allegheny Health System in its most recent fiscal year — with the hospital system reporting Monday that losses widened 62 percent to $137.6 million.
The report was released on the same day it was revealed that owner Highmark Inc. dropped a longtime West Penn Allegheny technology contractor and is spending $178.3 million to replace the electronic medical record system at the hospital system.
The additional outlay by Highmark, which purchased West Penn Allegheny in April, drew criticism from the state Insurance Department, which said it won't produce extra savings for the health insurer's ratepayers. The department said spending increases Highmark's financial commitments “from $1.834 billion to $2.012 billion” for developing an integrated health system with West Penn Allegheny as the centerpiece.
“Most of the projected savings and benefits attributed to the (electronic medical record) technology were included in the savings and benefits” previously described by Highmark as justification for buying West Penn Allegheny,” Deputy Insurance Commissioner Stephen Johnson wrote to Highmark on Oct. 24.
Despite the comments, Johnson didn't object to the spending.
Highmark spokesman Aaron Billger said the Insurance Department wasn't being critical of the spending. “Their authorization demonstrated that they saw the value in this investment,” he said.
Through an Insurance Department spokeswoman, Johnson declined to comment.
Allegheny Health Network has contracted with Epic Systems Corp. to develop a new medical record system, replacing longtime medical record vendor Allscripts Healthcare Solutions Inc., spokesman Dan Laurent said.
“We are transitioning to Epic to meet the changing nature of our broader enterprise,” Laurent said. “The requirements and potential vendor partners are different in this bigger program.”
In 2011, West Penn Allegheny renewed a contract with Allscripts to provide its record system through 2018 for an undisclosed price.
Billger said Highmark officials “reassessed” all West Penn Allegheny contracts after purchasing the hospital network.
In uncommon for health systems to switch technology vendors once a system is in place because a large amount of money and time will be lost, said Greg Bolan, an analyst for Sterne Agee in Nashville.
“If you think about the upfront costs that are required to not only purchase a new system but also the intangible costs, like retraining all your people on a new system ... You're talking about a very expensive endeavor,” Bolan said. “So you really need to feel that the current system you're using won't allow you to keep up with the Joneses, so to speak.”
Allscripts spokeswoman Claire Weingarden declined comment.
Billger said Highmark wants Epic to first establish an electronic medical record system at the five West Penn Allegheny hospitals and then connect it with other parts of the Allegheny Health Network, such as doctor offices, outpatient medical clinics, Jefferson Regional Medical Center and St. Vincent Health System.
Meanwhile, West Penn Allegheny had a net loss of $137.6 million in the fiscal year ended June 30, up from a net loss of $84.7 million in the prior year. Revenue was flat at $1.4 billion for the year as falling patient volume was offset by higher reimbursement rates.
With Highmark's financial assistance and management help, West Penn Allegheny is “pursuing an aggressive turnaround effort to strengthen our financial position and ensure that our hospitals and services remain vital and sustainable over the long run,” Laurent said.
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.
- Obamacare dramatically increases costs for some small businesses
- Hearing scheduled on landowners’ rights to block drilling
- California mulls rules for ‘driverless cars’
- EBay CEO’s pay for 2013 cut in half
- Job postings up in January
- Market high on buyback fever
- Disney to lose ‘powerful’ TV exec Sweeney
- Wholesalers boost stockpiles as sales fall
- Men’s Wearhouse, Jos. A. Bank agree to merger
- Stocks end slightly lower for a second day
- Minorities crucial to filling Marcellus shale gas drilling jobs