Judge OKs Highmark request to block talks by WPAHS

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A judge has granted Highmark Inc.'s request for a preliminary injunction blocking West Penn Allegheny Health System from talking to other possible investment partners.

In other words, the affiliation agreement between the two Pittsburgh health organizations is still intact, for now, and their trial separation has been called off.

In her ruling, issued Friday afternoon, Allegheny County Common Pleas Judge Christine Ward said granting the preliminary injunction "will prevent immediate and irreparable harm" to Highmark. She said the ruling "restores the status quo as it existed before [WPAHS's] wrongful conduct."

Highmark, the state's largest health insurer, sued for the injunction after West Penn Allegheny's board declared on Sept. 28 that Highmark had breached their year-old affiliation agreement. The breach arose from Highmark's alleged insistence that the region's second-largest health system file bankruptcy so the two regional health giants would be more likely to gain merger approval from the Pennsylvania Insurance Department.

Judge Ward noted the affiliation agreement between the two parties required West Penn Allegheny to give Highmark 30 days to repair any perceived breach but instead "WPAHS made the unilateral decision that Highmark's anticipatory breach was incurable."

She added that, based on testimony during a 31/2-day hearing, the disagreement could have been solved. "This court is convinced that it was improper for WPAHS to determine that Highmark's alleged anticipatory breach was incurable, thereby attempting to relieve WPAHS from its obligation to notify Highmark of the breach and allow it the 30 days to cure."

The potential harm inflicted by the would-be divorce is more than just a financial loss, Judge Ward wrote.

Highmark hopes to acquire West Penn Allegheny and make it the crown jewel in a planned $1 billion regional integrated health care delivery system to compete with UPMC, a fact noted by the judge.

"While the money contributed towards the partnership by Highmark, some $230 million, could be returned to Highmark via an award of monetary damages, it is clear that the loss of the unique opportunity to partner with WPAHS is irreparable harm that cannot be assigned a dollar amount," the judge wrote.

In addition, she said, the loss of health care staff, particularly specialty physicians, needed to build the larger health system that Highmark envisions would be a setback that couldn't be covered by monetary damages.

WPAHS Chairman Jack Isherwood said in an official statement Friday, "We are obviously disappointed with the court's decision; however, as we have said from the beginning, we believe that Highmark is a good partner for WPAHS.

"We look forward to engaging in constructive dialogue with them as soon as possible regarding the best way to move forward."

In contrast to Mr. Isherwood's disappointment, Allegheny General Hospital nurse Cathy Stoddart said nurses and service workers there are "excited." Ms. Stoddart is president of the AGH nurses' bargaining unit of the Service Employees International Union.

"We've always thought that Highmark is the best partner [for WPAHS] because they are invested in the community. We believe they are working toward the same values as the West Penn Allegheny Health System, and the nurses and caregivers at SEIU."

She did add, however, that "we call on Highmark to protect the pensions" of WPAHS employees as the system moves toward a likely restructuring.

Judge Ward wrote that the financially ailing West Penn Allegheny, in compiling a list of possible suitors before the Sept. 28 "break-up" announcement, had committed a possible contractual violation of its own.

"Highmark is likely to be successful in proving that WPAHS has violated the agreement's exclusivity provision by admittedly shopping for alternative partners," she wrote.

In her ruling, she said, "The public interest is best served" by granting the injunction.

"The public has a strong interest in a stable, high-quality and high-value care system, and Western Pennsylvania specifically has a strong interest in a healthcare network that provides choices to the consumers and competition," she wrote.

In an emailed statement, Highmark's spokesman said the company was pleased with the ruling.

"We remain firmly committed to an affiliation between Highmark and WPAHS," Michael Weinstein said in the statement. "We believe that the proposed affiliation is in the best interests of both parties, and more importantly, the entire community."

He also noted that the ruling resets the clock to Sept. 27, before the breach announcement, meaning "the proposed affiliation agreement with WPAHS remains in place. We look forward to meeting with WPAHS immediately to develop an appropriate financial restructuring plan or an alternative proposal."

While the preliminary injunction allows both parties to take a breath, Highmark's original lawsuit -- which also seeks permanent injunctive relief -- is still ongoing.

State Insurance Department Commissioner Michael Consedine said the department is still reviewing the Friday ruling to determine what, if any, impact it has on the original affiliation filing, which expires April 30.

Meanwhile, WPAHS spokeswoman Kelly Sorice said the health system would not comment on whether West Penn Allegheny might appeal the decision "until our board has a chance to fully review the opinion with legal question and further discuss."

businessnews

Steve Twedt: stwedt@post-gazette.com or 412-263-1963. Bill Toland: btoland@post-gazette.com or 412-263-2625.


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