Highmark Hopes to Rival UPMC’s Health System

Highmark, Pennsylvania’s largest health insurance company, is hoping to rival the hospital system of UPMC some day.  They have been looking to merge with West Penn Allegheny since earlier this year, but the deal soured recently.  According to Alex Nixon of The Pittsburgh-Tribune Review, leaders of both companies have been ordered by a judge to keep working on the deal, at least until the contract expires next May.  In “Highmark, West Penn Allegheny Meet to Resurrect Merger,” Nixon says that the companies put out a joint statement saying that they will work once again on the $475 million deal.

There are multiple issues that the company leaders are working through, most which pertain to the finances of West Penn.  West Penn is the second largest hospital system in the region, but is losing money and operating with a critical financial crisis.  Their pensions are underfunded by $280 million, so Highmark suggested that the federal Pension Benefit Guaranty Corp. take them over.  Bondholders are owed $750 million and Highmark is requesting that number be reduced to $400 million before the companies join forces.  William Penn’s operations lost $112.5 million during the fiscal year ending this June 30.

Highmark made these financial requests during an injunction hearing.  A judge allowed Highmark an injunction preventing West Penn from talking with other interested parties until May.  West Penn said that they had the right to talk with others because Highmark wanted them to go through bankruptcy because of the bond and pension debt.  They believed that Highmark had broken their contract with that request.  But now the two sides will be working together again and trying to secure a formal deal for West Penn’s five hospital health care system.  Acquiring the system is part of a $1 billion plan Highmark has to compete with UPMC.

 

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