West Penn Allegheny Health System fights order against solicitation

System says health insurer trying to force it into bankruptcy

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The West Penn Allegheny Health System on Tuesday asked the Court of Common Pleas to lift an injunction that prevents it from soliciting other affiliation partners, claiming that Highmark's support of the injunction "is nothing more than an attempt to prevent West Penn Allegheny from determining what options other than Highmark's bankruptcy exist."

The filing said Highmark is effectively "holding West Penn Allegheny hostage" to the two parties' affiliation agreement signed Oct. 31, 2011, that included a "no-shop" provision that prevented WPAHS from discussing possible affiliation with other parties.

On Sept. 27, West Penn Allegheny declared that Highmark had breached that affiliation agreement and that the financially strapped health system intended to test the market for other buyers. Highmark officials have steadfastly denied there was a breach.

WPAHS's filing also accuses Highmark of "delaying and frustrating the [Pennsylvania Insurance Department] review of the Affiliation Agreement" in order to force West Penn Allegheny into bankruptcy.

"Highmark knows that without significant capital infusions in a relatively short time frame, West Penn Allegheny will not survive," the filing continued, adding that without more funding the health system "will have to discontinue service lines and lay off employees before the end of the year and potentially declare bankruptcy."

Highmark officials could not be reached for comment late Tuesday.

The WPAHS filing was in response to a suit filed by Highmark two weeks ago in which the insurer asked the court for a temporary restraining order preventing West Penn Allegheny "from starting affiliation or acquisition discussions with other organizations." A ruling on that request is expected late next week.

The two sides had been working toward completing an affiliation partnership for more than a year when the deal fell apart last month over a disagreement about whether West Penn Allegheny should file for bankruptcy to get out from under debt obligations approaching $1 billion.

Highmark officials believe a bankruptcy filing could be a key to obtaining approval from the Insurance Department to close the deal, although state officials have said a bankruptcy filing is not a requirement. West Penn Allegheny, for its part, believes all other options should be tried before deciding to go the bankruptcy route.

In Tuesday's filing, WPAHS stated that "Highmark specifically and repeatedly told West Penn Allegheny that a significant debt reduction was a condition for closing an affiliation transaction and that Highmark would refuse to consummate the transaction described in the Affiliation Agreement, even if the [Insurance Department] approves it."

Tuesday's filing accuses Highmark of deliberately misstating the Insurance Department's position, adding that "Highmark's misrepresentation to West Penn Allegheny that the bankruptcy requirement originated from the [Insurance Department], has destroyed further the trust necessary for the parties to work together to obtain the Affiliation Agreements' regulatory approval."

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


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