Highmark to Acquire West Penn Allegheny

The governing bodies of Pittsburgh-based health insurance provider Highmark and West Penn Allegheny Health System (WPAHS) have both given unanimous approval to a plan to allow the insurance provider to acquire the hospital system. The still unfinished deal calls for Highmark to pump as much as $475 million into the faltering health system.

The first infusion of cash will come in the form of a $50 million grant from Highmark to WPAHS. The WPAHS board approved an operating budget at the same meeting it approved the deal. “We had a backup budget that we would have passed had the Highmark transaction not gone forward and that budget would have included shutting down West Penn Hospital,” said WPAHS Board Chair David McClenahan. A portion of the grant will be used to shore up other aspects of the system in the short term.

WPAHS executives hoped to find a way to retain the independence of the system and ensure its financial viability but it became clear that was no longer possible. “Highmark was our only option,” said WPAHS CEO Christopher Olivia. Olivia will move over to Highmark as a consultant in the coming weeks. Highmark CEO Kenneth Melani said the viability of each hospital will be evaluated as the new organization moves forward.

West Penn Allegheny Health system has been struggling financially since it was formed out of the ashes of the failed Allegheny Health, Education and Research Foundation (AHERF) in 1999 and both the health system and Highmark have been in a feud with the University of Pittsburgh Medical Center and its insurance company in recent years. The Announcement of the Acquisition is just the latest step in that process.

“UPMC has attempted, for a little better than ten years, to put our health system out of business,” said McClenahan.

Melani said WPAHS will continue to offer to reach a deal with the UPMC Health Plan for its members to use its hospitals and doctors. UPMC Health Plan has not accepted that offer in the past.

Many Highmark customers have been worried about not having access to UPMC doctors and hospitals in the future and the deal has done nothing to quiet those fears. “As an insurer Highmark seeks to have contracts with all healthcare systems,” said Melani, “If for some reason UPMC continues to say they will not contract with Highmark… then we will have to deal with that through our products and services.”

The deal is pending regulatory approval at the state and federal levels.

West Penn Allegheny and Temple Open Med School

Temple University’s medical school already has ties with West Penn Allegheny Health system and those ties will be growing with opening of a four-year medical school on the north shore starting in August of 2013.

The “Temple University School of Medicine at West Penn Allegheny Health System” will be a regional campus of the Philadelphia based school. The plan is to accept 30 students in the first year with a goal of growing to 50 students a year in the future.

“Schools in our commonwealth, and this region in particular, are not educating and returning enough physicians to care for future generations,” said West Penn President Christopher Olivia. Olivia said more than half of the doctors in the state are older than 50-years of age and only 8% are under the age of 35.

According to Olivia Temple University Medical School has a history of accepting students from Pennsylvania and keeping them in the state. He said the focus of the new school will be on Western Pennsylvania students, “If we can get our medical students, not from California, not from Oregon, but from Pennsylvania…. We will keep them here in the commonwealth.”

Temple Medical School takes on 180 students a year from its 8-10,000 applicants and nearly 1,000 of the applicants are from Western Pennsylvania said Olivia, “I assure you we will find 30 qualified western Pennsylvania students.” The new school already has tentative relationships with Duquesne University and Washington and Jefferson College to serve as a pipeline for students and Olivia plans to build similar relationships with other schools in the region.


West Penn has been struggling financially for years and has been talking about a partnership with the insurance company Highmark but Olivia said that will not have a negative impact on the school. According to Olivia the health system has been “meeting its numbers” this year. “I believe that what we are creating today will survive for generations to come.”

The new school will hold classes in Four Allegheny Center with plans to improve the pedestrian link between that building and Allegheny General Hospital. Olivia believes the addition of more students and teachers will bring more life to Allegheny Center’s other buildings and to the entire north side.

Smart Phone App May Save Lives

A new smart phone application that connects first responders to doctors at the West Penn Allegheny Health System and also links to life flight helicopters and Google Maps is the first of its kind in the U.S.

Jeffrey Polana, Director of Pre-Hospital Operations at Alle-Kiski Medical Center, worked on the app with a German friend. There is a triage system to help emergency personnel determine what the patient is experiencing and, for example, get an EKG to a doctor in 15 seconds. The closest hospital to treat the specific problem is identified and driving directions given.

There is a pre-alert function that sends coordinates from an accident scene to a helicopter dispatch center, according to Polana, that can save up to ten minutes in getting a patient to the hospital. Saving time can save lives, says Polana.

Anyone can download the app free through the Apple Store and use some of the functions, but approval is needed to contact West Penn Allegheny Health System doctors or a dispatch center. There have already been 500 downloads and 140 approvals in the Pittsburgh area, says Polana.

WPAHS Posts Big Losses in 2010

West Penn Allegheny Health System says one-time charges pushed the nonprofit further into the red in fiscal 2010. The System booked a $70.7 million non-cash asset impairment charge as part of the changes being made to West Penn Hospital and the Suburban Campus of Allegheny General Hospital. It also took an $11.8 million one-time hit for other restructuring costs. The System says without these restructuring costs the operating loss for fiscal year 2010 would have been $7.4 million, while its net profit would have been $19.4 million.

At the same time WPAHS reports that it ended the year with more cash on hand than it has since its formation. The fiscal year ended June 30th, 2010 with $306 million in cash. That is equivalent to 71 days cash on hand. President and CEO, Christopher Olivia says the “improved liquidity” will allow WPAHS to continue its restructuring plans in the current year. “We spent the last two years stabilizing the health system and improving our ability to generate cash flow from operations,” says Olivia, “I believe we are moving forward at a remarkable pace, however, there is still much work to do and many challenges lie ahead.”
Last week WPAHS finalized it plan to restructure operations at West Penn Hospital and the Suburban Campus of Allegheny General Hospital.

West Penn Finalizes Job Cuts

The West Penn Allegheny Health System announced its final plans for the consolidation of the West Penn Hospital in Bloomfield today saying around 400 jobs would be cut as relocation of its services begins in January. An original estimate for jobs lost due to the consolidation announced in June was approximately 1,500 positions. The facility in Bloomfield will continue to offer outpatient services and outpatient surgery. But other areas, inluding emergency services will move to Allegheny General Hospital on the North Side. The emergency unit of the Bloomfield branch will close December 31. According to West Penn, 210 employees will accept other positions within the system, 65 employees will move to Allegheny General, 220 employees left through resignations, and 400 will lose their jobs as a result of the consolidation. West Penn spokesman Dan Laurent says West Penn's plan is to provide health care needs locally with an eye on future changes in health care reform, "We're focused on our system and what we need to do to become a more effective health care system for the people of this community." Laurent says they plan to develop more localized, community health care at a center it plans to built in Peters Township next year.

Suit Seeks to Block Changes to Bellevue Hospital

A community group that helped craft an agreement to merge Suburban General Hospital with the West Penn Allegheny Health System (WPAHS) is now suing to stop that system from converting the Bellevue hospital into an outpatient facility. The Suburban General Hospital Advisory Board says the 1994 agreement requires West Penn Allegheny to maintain the hospital as a full service entity. So, they've asked an Allegheny County judge to block the plan by WPAHS to close the Suburban General emergency room and stop admitting patients later this month. WPAHS still plans to offer some outpatient services and replace the emergency room with an urgent care center.

State Funds Sought for West Penn Layoff Help

After yesterday's announcement that the West Penn Allegheny Health System will drop 1500 employees, Mayor Luke Ravenstahl says Pittsburgh and Allegheny County are teaming up with the Three Rivers Workforce Investment Board to secure $500,000 in state funds. Ravenstahl says that money will be used to help transition the workers into new employment.

The mayor says he's also concerned about the reuse of some empty facilities. He says the city is committed to helping Bloomfield get through this "tough time."

"Anytime you take 1500 employees out of an area, specifically a smaller neighborhood like Bloomfield, it's going to have an impact. It's going to be tough, but they'll survive," says Ravenstahl. "It's a strong-willed neighborhood with tough people there, and we'll be there to help them along the way."

West Penn Will Shed Services, Jobs

About 1,500 employees at the West Penn Allegheny Health System will lose their jobs in the coming months. That's due to the consolidation of Allegheny General Hospital and West Penn Hospital. AGH will become the primary hospital of the health system while most medical and surgical programs at West Penn will move to AGH in the first quarter of next year. IN addition West Penn's emergency department will close in January.
West Penn will continue to provide its Women's and Infants' Center, bariatric surgery program and the burn center and inpatient rehabilitation programs.
President and CEO Christopher Olivia says despite improving its cost structure West Penn Allegheny has lost $11.6 million in the first three quarters of this fiscal year.
Olivia says he can’t say yet how much money the system will save through the consolidation. Most of the 1,500 lost jobs will come from West Penn which currently employs 2,400.
Olivia said the city and county’s population has declined and more patients are seeking care closer to home ...outside of the city as population shifts in the region. He also says more patients are seeking care in an outpatient setting. On an average day West Penn has about 240 patients, or just 47 percent capacity. West Penn will see its inpatient beds cut from 505 to 202.

“After long and careful deliberation, we believe this consolidation, together with our suburban strategy, will help us achieve this goal and ensure that we have the necessary capital and alignment of resources to fulfill our mission and charitable purpose."

In May, West Penn Allegheny announced that the Suburban Campus of AGH in Bellevue, would become an outpatient facility only. Two weeks ago, the system announced plans to build an ambulatory care and surgery center in Peters Township.