Pennsylvania approves Highmark-West Penn Allegheny Health System merger [Pittsburgh Post-Gazette]

April 29--The Pennsylvania Insurance Department today gave conditional approval for insurer Highmark Inc. to affiliate with the financially ailing West Penn Allegheny Health System, laying the foundation for Highmark's plans to establish an integrated health care delivery system to compete with UPMC.

That new integrated system, as of this afternoon, is known as the Allegheny Health Network.

"The community knew what was at stake if West Penn did not survive," said Highmark CEO William Winkenwerder Jr., thanking the region for its support and the Insurance Department for its approval.

"This is truly day one," for WPAHS, for the new health organization -- and a new ad campaign, unveiled today and aimed at introducing the merged companies and the Allegheny Health Network to the Pittsburgh region.

And "we will be true to our promise" of rescuing WPAHS while steering care toward community clinics and hospitals, said Dr. Winkenwerder said.

John Paul, already the head of Highmark's health wing, will also be installed as WPAHS's new CEO, Dr. Winkenwerder said.

Insurance commissioner Michael Consedine, in an interview Monday morning, said, "When all is said and done, the conclusion we came to was that, in a word without this transaction taking place," Pittsburgh's health care market was worse off. "Having a viable West Penn [will] be a benefit to consumers."

In statement, Gov. Tom Corbett said "the goals for the commonwealth are to improve health care access, quality and affordability. Today's decision is an important step toward making these goals a reality in Western Pennsylvania."

In approving the affiliation, the insurance department set out specific "key conditions," which it said are designed to:

--Promote continued competition in the region and encourage policyholder savings and reduced premiums;

--Maximize access to Highmark's delivery network for unrelated providers, community hospitals and insurers;

--Monitor the impact of the transaction on community hospitals and hold Highmark accountable to its stated intention to enhance community hospitals;

--Limit potential adverse competitive effects on insurers and providers contracting with Highmark and West Penn;

--Reduce the financial risk to Highmark and its policyholders associated with continued financial commitments to West Penn or its integrated delivery network;

--Provide transparency and, where appropriate, departmental review of future transactions that may not otherwise be subject to the department's jurisdiction;

--Hold Highmark accountable for its stated benefits associated with its delivery network, including policyholder savings and continued competitiveness of community hospitals;

--Require Highmark's continued commitment to community and charitable endeavors; and

--Address the potential termination of the UPMC contract in 2015 by requiring disclosure and communications to patients and subscribers.

Cathy Stoddart, president of the Allegheny General Hospital nurses' bargaining unit of the Service Employees International Union, said this morning that "we're thrilled"" the affiliation has been approved.

"We feel like Highmark is the right partner for us. Now with Highmark and the way this new integrated delivery system is being built, I only see good things happening."

Despite the uncertainty of the past two years, when affiliation plans were announced, "The staff has stuck by. We have not had a mass exodus of nurses," she said. And, now, with the affiliation approved, "We're ready to go."

Highmark and WPAHS proposed the acquisition in early 2011, and by November had come to a formal affiliation agreement. The Department of Insurance spent the next 17 months examining the billion-dollar merger.

In addition to the governor, local legislators voiced their support for the affiliation.

"Economically, this decision will save jobs, create competition for consumers with their health care choices and prevent a hospital system from closing its doors. All of this is good business and good for the health care options in our region," said State Rep. Tony DeLuca, D-Penn Hills and his party's ranking member of the House Insurance Committee.

State Rep. Dan Frankel, D-Squirrel Hill, said in his release that "Keeping West Penn Allegheny Health System strong is essential. It's essential to the 12,000 employees who work there, and to all of us who believe in the importance of good, quality jobs. It's essential to maintaining a competitive marketplace."

Steve Twedt: [email protected] or 412-263-1963.

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