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Highmark adds more land for its $1B provider network

| Friday, June 22, 2012, 6:30 p.m.

Highmark Inc.'s acquisition of property in fast-growing Cranberry is the latest in a string of land deals the health insurer has made this year for its plan to establish a network of outpatient medical centers in suburbs ringing Pittsburgh.

The company, which is developing a $1 billion provider network to compete with UPMC, the dominant health system in the region, has also bought land in Pine and Monroeville.

In the latest purchase, Highmark spent $8.9 million for a 25-acre site along Route 228. A Highmark subsidiary, Principo Advisors LLC, on May 31 acquired the Butler County property from Mine Safety Appliances, according to Butler County deed records.

While no specific plans for the site have been finalized by Highmark, spokesman Aaron Billger said the purchase is part of its provider strategy “to keep care in the community” that is cost-effective and “close to our members.”

The deed for the land on Route 228 states that its use “shall be limited to activities primarily relating to a medical mall, health care facilities,” or other medical-related uses.

In event that Principo determines it isn't economically feasible to construct and use facilities meeting the uses described in the deed, the property may be used for corporate headquarters or office purposes, the deed states. Principo must begin construction on or before June 1, 2014, the deed also states.

Butler Health System, which operates some outpatient services from the Cranberry YMCA, has had “very, very preliminary” talks with Highmark about the insurer's plans in the Cranberry area, said Kevin Stansbury, Butler's vice president of business development.

Butler has no plans to partner with Highmark on development of a medical mall, he said. The system, which has recently expanded outpatient services in Saxonburg and Slippery Rock, would be open to partnerships with any provider and further expansion in Cranberry, which Stansbury called “a very fast growing market.”

Highmark, the state's largest health insurance company, has said its $1 billion network will be anchored by the West Penn Allegheny Health System, which Highmark is trying to acquire, and will include physician practices, 10 medical malls or outpatient centers, Jefferson Regional Medical Center and other components.

The Cranberry land deal follows transactions by Highmark worth $10.3 million in Pine earlier this year. Another Highmark subsidiary, Optimus 28 Management, assembled 33 acres of land along Route 19 that also could be used for a medical mall or similar outpatient facility.

“There have been engineers working on the site Optimus purchased and they informed me that they were working for Highmark,” said Scott Anderson, Pine Township's assistant manager.

Officials with Pine and Cranberry said they have not received plans from Highmark or its subsidiaries regarding uses of the properties.

Highmark also paid $2.6 million for property in Monroeville last month through a subsidiary called Osiris Properties LLC. And it plans to finish work on an outpatient facility in Murrysville that was started by West Penn Allegheny.

Billger said Highmark has been forming shell companies, such as Osiris, Optimus and Principo, to acquire land for its provider network so that it isn't over-charged by land owners. The companies have been formed by Cranberry attorney Severin Russo, who could not be reached for comment.

West Penn Allegheny, which owns five hospitals, also has outpatient centers Peters, McCandless, Bellevue, New Kensington and Vandergrift.

Alex Nixon and Sam Spatter are staff writers for Trib Total Media. Nixon can be reached at 412-320-7928 or anixon@tribweb.com. Spatter can be reached at 412-320-7843 or sspatter@tribweb.com.

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