West Penn Allegheny Health System's turnaround tied to buy
West Penn Allegheny Health System will be profitable in two to three years if the financially troubled hospital network can be quickly acquired by health insurer Highmark Inc., Dr. Keith Ghezzi, the health system's interim CEO, said on Thursday.
Ghezzi, who has been head of Pittsburgh's No. 2 health system for three months, said he remains "very optimistic" about turning around West Penn Allegheny, which has posted more than $180 million in operating losses over its last three financial years. Two of three major rating agencies and the system's auditors have expressed skepticism on whether it can survive.
But financial support from Highmark to revamp its facilities, recruit new physicians and focus on providing high-quality care at lower cost will bring patients back, Ghezzi said during a briefing yesterday in the health system's North Side offices.
"We provide care at a lower cost," he said. Patients and insurers "are going to look for value."
West Penn Allegheny released Medicare data yesterday showing that the average cost per discharge from its five hospitals was less than the average for six of UPMC's hospitals. The data, from 2010, showed that the average cost at West Penn Allegheny was $5,879, compared with an average of $7,253 for UPMC.
Highmark, the state's largest health insurer, has committed to giving the health system $475 million in grants and loans. Highmark CEO Dr. Kenneth Melani said in November that West Penn Allegheny could be profitable in two years if state regulators approve the acquisition by June.
Ghezzi said he and top executives from Highmark have met with the state Insurance Department several times in the last four weeks to try to speed the approval process. The meetings have been "constructive," and he hopes the department will approve the transaction sometime between June and September.
Both Fitch Ratings and Moody's Investor Service downgraded West Penn Allegheny's credit rating last year. And its auditor, KPMG, said in December that there was "substantial doubt about West Penn Allegheny Health System's ability to continue as a going concern." Ghezzi said the system's debt service of about $50 million a year is manageable, and it has no plans to try to restructure its debt.
A local health care expert agreed that West Penn Allegheny can be returned to profitability, and even faster than officials are suggesting.
"I would be surprised if it took longer than a year" to make substantial progress in turning around West Penn Allegheny's finances, said Jan Jennings, a health care consultant and former CEO of Jefferson Regional Medical Center in Jefferson Hills.
Highmark has the management talent to make sure West Penn Allegheny is run efficiently, and its efforts to acquire primary care physician practices and affiliate with other hospitals should boost revenue at the health system, Jennings said.
"I have every confidence they can make it," he said.
Highmark announced in January that it had acquired Premier Medical Associates, a 60-doctor private practice in Monroeville. And the insurer has said it's talking about partnerships with other physician groups and hospitals throughout the state.
Ghezzi said West Penn Allegheny has hired 50 physicians since July and is close to announcing several more hires. It also is targeting the 800 physicians who practice at West Penn Allegheny hospitals but are not employed by the system.
Add Alex Nixon to your Google+ circles.
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.