| Business

Larger text Larger text Smaller text Smaller text | Order Photo Reprints

West Penn Allegheny Health System's credit rating downgraded

Email Newsletters

Sign up for one of our email newsletters.

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

Saturday, Dec. 24, 2011

West Penn Allegheny Health System's credit rating was downgraded on Friday by Fitch Ratings because of a "significant deterioration in operating performance" at the struggling five-hospital network.

Fitch's downgrade, to "highly speculative" from "speculative," on the health system's $750 million in bond debt follows a downgrade last month by Moody's Investor Service and no change by Standard & Poor's Rating Service.

West Penn Allegheny, the No. 2 hospital system in Pittsburgh, has agreed to be acquired by Highmark Inc., the state's largest health insurance company, for $475 million. The deal, which could take a year to be approved by state regulators and others, is expected to help the financially troubled health system, Fitch said.

In the near term, its financial losses are accelerating, "primarily driven by a drop in volume and physician losses," Fitch said. "A 15 percent decline in discharges in 2011 was to a large degree caused by loss of physicians as the system reorganized and consolidated several of its inpatient services among its urban hospitals."

Since then, with the backing of Highmark, the system has announced it will reopen the emergency department at West Penn Hospital in Bloomfield and invest in other improvements at the hospital and at Forbes Regional Hospital in Monroeville.

"We are disappointed in Fitch's decision to downgrade West Penn Allegheny Health System's bond rating," West Penn Allegheny said in a statement yesterday. "However, we share their forward-looking view that WPAHS' affiliation with Highmark is a positive development that should yield benefits for both organizations."

A "highly speculative" rating means the health system is meeting its financial commitments, Fitch said, but the "capacity for continued payment is vulnerable to deterioration in the business and economic environment."

For the year ended June 30, West Penn Allegheny reported an operating loss of more than $50 million. And in the July-September period this year, the hospital system reported an operating loss of $27 million.

Highmark's proposed acquisition of West Penn Allegheny led UPMC, the region's dominant hospital system, to end negotiations with Highmark on new reimbursement contracts. Highmark and UPMC on Thursday said existing contracts, which set discounted in-network rates Highmark pays for its members to receive treatment by UPMC, will be extended to June 30, 2013.

Add Alex Nixon to your Google+ circles.

Subscribe today! Click here for our subscription offers.




Show commenting policy

Most-Read Stories

  1. Penguins co-owner Lemieux snuffs rumored rift with Crosby
  2. Pirates sign free agent 1B-OF Goebbert, RHP Webster
  3. Steelers kicker Boswell puts best foot forward
  4. Steelers notebook: Tomlin ends practice with third-down work
  5. Attorney wants evidence from South Allegheny teacher’s cellphone thrown out
  6. WPIAL AAAA boys basketball preview: Runners-up last season, North Allegheny hopes to take next step
  7. Explosion claims life of garage owner
  8. Steelers notebook: Tomlin not grooming successor to RB Williams
  9. Warhol bridge closed as police investigate unattended bag
  10. PIAA Class AA first-round preview: Karns City vs. Bedford
  11. New Stanton council seeks input on borough community plan