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Highmark, West Penn agree on terms of acquisition

Luis Fábregas
| Friday, Oct. 21, 2011

Highmark Inc. and West Penn Allegheny Health System have reached a verbal agreement on the terms and conditions of the insurer's planned acquisition of the region's second-largest hospital network, the Tribune-Review has learned.

Board officials at both organizations need to sign the agreement before it becomes official and can be forwarded to state regulatory agencies. It is unclear when the signing will take place, but an announcement could come in about a week.

"We expect a definitive agreement to be signed very soon," West Penn Allegheny spokeswoman Kelly Sorice said on Thursday.

A signed agreement allows the two organizations to seek necessary approvals from the Pennsylvania Department of Insurance, the Internal Revenue Service and the state's attorney general.

Highmark's acquisition of West Penn Allegheny, announced June 28, aims to preserve the parent company of Allegheny General Hospital and five other suburban hospitals. The system reported a loss from operations of $48.8 million for the nine months ended March 31.

Highmark, the state's largest health insurance company with about 3 million customers in Western Pennsylvania, will spend about $475 million on the ailing hospital network. As part of the deal, the insurer gave a $50 million grant to West Penn Hospital in Bloomfield, which would have closed without it. West Penn's emergency department closed Jan. 1, but the hospital provides services such as obstetrics, surgery and burn care.

Sorice said a "detailed assessment process" is under way to determine if the emergency department and other services will be restored at West Penn.

"Reopening the emergency department as part of a reinvigorated hospital is one scenario that is part of this assessment process," she said.

Community groups have lobbied for months to strengthen services at West Penn. State Sen. Jim Ferlo, D-Highland Park, one of several leaders who supports the reopening of the emergency department, told the Tribune-Review yesterday that Highmark and West Penn Allegheny have agreed to hold a public forum to talk about their plans. The forum would be held after officials submit their written agreement to state regulators, he said.

"It is a fundamental requirement," Ferlo said of reopening West Penn's emergency department.

Highmark's planned acquisition of West Penn Allegheny prompted health giant UPMC to stop contract negotiations with Highmark. UPMC executives believe the Highmark-West Penn Allegheny alliance will be in direct competition with UPMC's 20-hospital network. UPMC officials have rejected Highmark's requests to return to the negotiating table.

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