WPAHS confident it can meet pension obligations [Pittsburgh Post-Gazette]

Jan. 25--West Penn Allegheny Health System should be able to meet its pension payment obligations under current financial projections, Highmark President and CEO William Winkenwerder Jr. said Thursday.

The region's No. 2 hospital network "will be entirely responsible for the pension fund obligations," he said, and he suggested the health system also would be responsible for making up any underfunding or shortfalls in pension accounts.

Striking an optimistic tone, Dr. Winkenwerder said, "An important milestone for the community has been achieved this week" when the insurer filed amended paperwork Wednesday with the Pennsylvania Insurance Department, reflecting the recent agreement with WPAHS bondholders that will settle an estimated $710 million debt obligation.

With the filing, the parties now await final insurance department approval for the proposed Highmark-WPAHS affiliation.

In a telephone briefing with journalists Thursday, Dr. Winkenwerder declined to speculate on how the Insurance Department will view a recent deal in which WPAHS bondholders agreed to sell their bonds to Highmark for 87.5 cents on the dollar, thus avoiding a West Penn Allegheny bankruptcy filing. But he did offer that "we did share the direction we were headed a few days ago" with insurance officials.

The department has "been a good partner and, I might add, a patient partner in this process," he said.

Dr. Winkenwerder said Highmark had secured a $600 million line of credit as the insurer builds its own integrated health care delivery system to compete with UPMC, the region's dominant health care provider. "There are no plans to try to secure a greater amount of funding."

However, Moody's Investors Service on Thursday said it has placed Highmark on review for possible ratings downgrade citing "the adverse potential financial impact" of the proposed transaction.

During the briefing, Dr. Winkenwerder reaffirmed Highmark's commitment to supporting West Penn Allegheny so "we wouldn't have a single source of medical care for this large community of people."

"This affiliation will help slow the cost of health care, improve the quality of care and improve the access to care."

Dr. Winkenwerder said that while there are no plans to close any West Penn Allegheny facilities if the affiliation is approved, a proposal to open a Pittsburgh branch of the Temple School of Medicine has been shelved, now that $75 million earmarked for that initiative that has been redirected to clinical improvements in the health system.

Other highlights from the briefing:

--Dr. Winkenwerder said Highmark remains interested in a long-term relationship with UPMC on the insurance side. "We want to work together with all the providers in the community." The current Highmark contract with UPMC ends in 2015 and UPMC officials have said they do not intend to renew the pact now that Highmark will be a competing health care provider.

--A proposed $50 million increase in reimbursement payments to West Penn Allegheny "is very small as a percentage of the total payments," Dr. Winkenwerder said -- but that doesn't mean that subscribers won't see higher premiums. "We would naturally be making some level of increase because of inflation and the rising cost of health care."

--Highmark expects an affiliation deal in the works with Jefferson Regional Health System in Jefferson Hills to close by mid-February, and a deal with St. Vincent Health System in Erie to close "soon after."

Steve Twedt: stwedt@post-gazette.com or 412-263-1963. Staff writer Bill Toland contributed.

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