Moody's changes Highmark credit outlook to 'negative'

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Moody's Investors Service has changed the outlook on Highmark Inc.'s insurance financial strength rating and senior unsecured debt rating to negative from stable following the announcement that the company's president and CEO, Ken Melani has been placed on unpaid administrative leave.

Dr. Melani, who joined the medical insurer in 1989 as its chief medical officer and became its CEO in 2003, is taking an unpaid leave of absence in light of the charges filed in the wake of a Sunday altercation with the husband of his mistress.

In a statement responding to Moody's announcement, Highmark said the company "continues to be a financially sound company with adequate resources to support investments in a new integrated health care delivery system to preserve provider choice for our members."

Moody's stated that the change reflects the additional uncertainty caused by the absence of Dr. Melani while Highmark is in the midst of three major issues currently facing the company: its contract with UPMC; obtaining regulatory approval of its affiliation with West Penn Allegheny Health System; and the investment and turnaround plans for WPAHS if regulatory approval is obtained.

In the statement Highmark said its "board of directors is fully committed to our mission and the business strategies that will guide us going forward.

"The company's experienced senior leadership team remains focused on addressing our top priorities, including: securing a multi-year contract with the University of Pittsburgh Medical Center (UPMC), completing our proposed affiliation with the West Penn Allegheny Health System, and preparing for the many challenges that health care reform brings to the marketplace."

Highmark had previously announced that the company's chairman of the board, J. Robert Baum, will serve as acting chief executive officer.

Defense attorney Robert Del Greco has said the charges against Dr. Melani are low-grade misdemeanors and he is confident his client will prevail.



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