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West Penn Hospital upgrades planned in phases

| Thursday, Nov. 17, 2011

Dr. Kenneth Melani did his medical residency at West Penn Hospital and practiced there as a physician.

So it was gratifying for him on Wednesday to announce details of a major investment the company he leads, health insurer Highmark Inc., will make to revitalize the Bloomfield hospital. It includes spending $18 million over the next six months to reopen the hospital's emergency department and make other improvements.

But nostalgia is taking a back seat to the business at hand, Melani said. His priority is making West Penn Allegheny Health System financially stable by upgrading its facilities so it can compete with Pittsburgh's dominant hospital system, UPMC.

"For me, personally, it does mean a lot," Melani, Highmark's CEO, said following a meeting with hospital employees. "The personal part comes second."

Melani is making a $475 million bet that Highmark's acquisition of the five-hospital West Penn Allegheny system will give Western Pennsylvanians a viable alternative to UPMC. That choice, Melani argues, also will lower costs and improve quality of medical services.

The acquisition, which still requires regulatory approval, has fed a war with UPMC. The hospital system, which generates $9 billion a year in revenue, said it won't give Highmark's customers favorable rates at its hospitals because the insurer will become a direct competitor.

Whether or not the two health care titans come to terms on a new contract, a combined Highmark/West Penn Allegheny will have to battle UPMC for patients. And the key fronts will be Bloomfield, where West Penn Hospital is a mile away from UPMC Shadyside, and Monroeville, where West Penn Allegheny's Forbes Regional Hospital will face competition next year from UPMC East, a $250 million hospital that's expected to open in July.

"It's critically important that we preserve these valuable community institutions," Melani told the 150 employees and others who attended the meeting on renovation plans.

Before Highmark announced its intention to buy West Penn Allegheny in June, the system closed West Penn's emergency department and was considering closing the entire hospital. A $50 million grant in June pushed the system into the black for its 2011 fiscal year and kept the hospital open. Without the grant, the system would have posted a net loss of $30 million for the year.

Net losses totaled $146 million for 2008, 2009 and 2010, leaving the system without money to make capital improvements and driving patients to other hospitals, officials said.

UPMC, meanwhile, experienced a 10 percent increase in patient volume in the July-September quarter.

"UPMC Shadyside, like all other UPMC facilities, is busy because it offers the care, physicians and services in a technologically up-to-date and modern facility that West Penn Hospital cannot provide," said UPMC spokesman Paul Wood. "When patients are given free choice, they're choosing UPMC."

Melani said restoring West Penn to the "premier hospital" it once was will draw patients back from an "overloaded" UPMC Shadyside.

The hospital expects to hire 200 new workers initially as it reopens the emergency department, said Dr. Keith Ghezzi, interim CEO of the West Penn Allegheny system.

All of the hospital's semi-private patient rooms will be converted to private rooms over the next two years, giving it a total of 300 private rooms, said Dr. William Goldfarb, Highmark's regional director of the West Penn Hospital campus. Melani said private rooms are key in marketing the hospital because patients expect them.

Debbie Michaels, a hospital employee who listened to the plans, called them a "good start" that she hopes will be successful in turning around the hospital's fortunes.

"I'm just glad that it's finally coming back," she said.

Additional Information:

West Penn renovations

Highmark Inc. is beginning a multi-phase revitalization of West Penn Hospital in Bloomfield as it seeks to restore the financial health of the hospital's parent, West Penn Allegheny Health System. Below are details of projects revealed by Highmark:

Phase 1:

-- Reopen emergency department, most likely in January

-- Complete interior renovation of emergency rooms, including new technology

-- Add new covered entry and drop-off area for emergencies on Millvale Avenue

-- Convert patient rooms on top two floors to private rooms

-- Renovate the hospital's intensive care unit

-- $18 million investment over next six months

Phases 2 and 3:

-- Expand the emergency department and add an observation area

-- Focus on upgrading women's medical services, including delivery rooms and neo-natal intensive care unit

-- Renovate the Mellon Pavilion interior and add an entrance on Liberty Avenue

-- Upgrade the hospital's ambulatory surgery center

-- Improve parking garage

-- Create 300 to 350 private patient rooms

-- Cost is undetermined

-- Work will take place over next two years

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