The West Penn Allegheny Health System lost $370.8 million in the fiscal year ending June 30, 2013, according to a newly-release audited financial statement, more than double the $137.6 million loss the health system had reported for the year in its unaudited statement released in October.
The disparity is largely due to the accounting report requirements related to the health system’s acquisition last year by Highmark, said Liz Allen, interim chief financial officer for the Allegheny Health Network, which WPAHS is now part of.
“It’s not a concern of substance to me,” she said by phone in a media briefing Thursday afternoon. “We are required to calculate and present it this way.”
The “primary driver” for the different numbers, she said, was a process known as “purchase accounting,” in which West Penn Allegheny’s assets had to be recalculated to reflect their Fair Market Value as part of the Highmark deal. “We expected this to happen.”
The audited statement's biggest adjustment was a new line item for “Goodwill” at $151 million, which refers to Highmark paying more to acquire West Penn Allegheny than its Fair Market Value. At the time of the Highmark transaction, Ms. Allen explained, WPAHS had a negative net asset value of $659.9 million.
That Goodwill number does not necessarily mean Highmark overpaid for West Penn Allegheny, she said, as there typically is considered to be intangible value to a company.
Now that West Penn Allegheny is part of the larger Allegheny Health Network, “the bigger concern I have is to turn the organization around,” said Ms. Allen. “We’re pleased with our turnaround progress to date. It’s well ahead of our schedule and we’re confident it can be turned around, and in pretty quick order.”
Thursday's filing can be viewed online at www.dacbond.com under "View Disclosure Documents."
The West Penn Allegheny Health System is comprised of Allegheny General Hospital on North Side, West Penn Hospital in Bloomfield, Forbes Regional Hospital in Monroeville, Canonsburg General Hospital in Washington County and Alle-Kiski Medical Center in Natrona Heights.
In April 2013, Highmark acquired West Penn Allegheny, which is now the centerpiece of the insurer’s Allegheny Health Network that competes with UPMC in the local health care provider market.
On Wednesday, Highmark reported $294.1 million in net income for calendar year 2013.
Steve Twedt: firstname.lastname@example.org or 412-263-1963. First Published April 24, 2014 2:05 PM