Highmark letter to West Penn Allegheny asks for reconsideration of affiliation agreement

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Top officials at Highmark Inc. renewed their plea today to West Penn Allegheny Health System officials to drop their claim that Highmark had breached their affiliation agreement, saying the declaration "came as a surprise and great disappointment to us."

In a letter delivered to WPAHS board chairman Jack Isherwood, Highmark president and chief executive officer William Winkenwerder Jr. and board chairman J. Robert Baum wrote that West Penn Allegheny officials had "completely misconstrued the presentation we made on Sept. 27. What we intended and presented was a plea and a plan to jointly approach your major creditors about a debt restructuring. The proposals we discussed would fully protect the pensions of all WPAHS employees.

"That you would not agree to this eminently reasonable approach to attempt to insure [Pennsylvania Insurance Department] approval -- as well as the long-term survival of WPAHS -- shocked us."

In response, Mr. Isherwood wrote back late Friday that while WPAHS remains open to discussions, "we doubt our 18 directors misconstrued your words, 'The original Affiliation is history,' and subsequently, 'The Affiliation is dead.'"

He added: "As we have continued to state, WPAHS remains hopeful that Highmark can come to the table with an alternative option to bankruptcy."

Dr. Winkenwerder and Mr. Baum said they believe an affiliation would "help create a viable alternative for high quality medical care in the Pittsburgh region" and urged them to return to talks to finalize the arrangement.

"It is essential that such discussions address WPAHS's continued weak financial condition and result in a plan that will meet with approval by our regulators and enable us to proceed with our envisioned affiliation," they wrote in the letter.

Highmark Inc. officials want the West Penn Allegheny Health System to file for bankruptcy so it can shave $600 million off the $1.4 billion price tag for acquiring the region's second largest health system, WPAHS board members have told the Pittsburgh Post-Gazette.

WPAHS's leaders announced last month that they considered Highmark in breach of the $475 million affiliation agreement under which Highmark planned to acquire West Penn Allegheny.

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Steve Twedt: stwedt@post-gazette.com or 412-263-1963.


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