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West Penn Allegheny digs in heels

| Tuesday, May 22, 2012, 3:03 p.m.

West Penn Allegheny Health System says Highmark Inc. can't force it to drop an antitrust lawsuit against rival UPMC, even though the state's largest insurer pledged $475 million to bail out the troubled health system.

Even after Highmark acquires West Penn Allegheny, the parent organization that would control the entities "cannot, absent a breach in its fiduciary duty to West Penn Allegheny, unilaterally order West Penn Allegheny to dismiss its antitrust action against UPMC," the health system said in a federal court filing on Tuesday.

Highmark spokesman Michael Weinstein responded unequivocally in an email to the Tribune-Review: "Once the Highmark-WPAHS (deal) is approved and consummated, we will drop the antitrust lawsuit."

The hospital system's court filing in Pittsburgh followed UPMC's request last week to put the three-year-old antitrust case on hold. UPMC reached an agreement on May 2 with Highmark in which the insurer would drop West Penn Allegheny's lawsuit once its acquisition is complete.

"West Penn Allegheny did not approve the putative settlement with UPMC, and Highmark does not have the authority to bind West Penn Allegheny in any way," the health system said. "After more than three years' delay, West Penn Allegheny is entitled to have this litigation proceed expeditiously without undue outside influence or interference, unfettered by the agreements of third parties."

Putting the case on hold would be counterproductive because the acquisition "may not occur," West Penn Allegheny said, noting the state Insurance Department might not approve the buyout and either party could walk away from it. "Under any such circumstances, a stay will have worked a considerable hardship on West Penn Allegheny."

West Penn Allegheny spokeswoman Kelly Sorice declined to comment, citing a policy to not discuss litigation.

Highmark has given the health system $150 million in grants and loans since June, when it announced the acquisition plan. The money covered financial losses and began renovations at two hospitals.

Highmark would fund the not-for-profit organization, known as the Ultimate Parent Entity, that would control it and West Penn Allegheny, and Highmark executives would staff it.

UPMC spokesman Paul Wood said the provision dealing with West Penn Allegheny's lawsuit is part of a larger agreement covering many issues. Yet, he said, UPMC expects Highmark to make good on its promises.

"While regrettable, West Penn Allegheny's decision to continue to pursue this lawsuit does not change anything about the May 2 agreement," he said.

The agreement, negotiated with pressure from Gov. Tom Corbett and state legislators, allows about 2 million Highmark members in the region to continue receiving care at UPMC's hospitals and from its doctors at in-network rates through the end of 2014. It ended a nearly yearlong standoff between the health care giants, sparked by Highmark's plan to acquire West Penn Allegheny.

The Corbett administration declined to comment yesterday.

West Penn Allegheny filed its antitrust lawsuit in 2009, alleging that Highmark and UPMC conspired to drive it out of business. After Highmark agreed to buy it, West Penn Allegheny dropped the insurer from the suit and amended it to allege predatory practices by UPMC.

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