New filing: WPAHS to get $50 million more for services to Highmark clients

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West Penn Allegheny Health system will be paid a total of $50 million more for the health services it provides to Highmark Inc., according to documents filed with the Pennsylvania Insurance Department as part of the companies' effort to affiliate.

Highmark Inc. filed the new paperwork to update the department on its recent agreement to buy up part of WPAHS's junk debt as part of its bid to take over the ailing health system.

Part of the agreement, according to the insurance department, will require "$50 million aggregate increase in rates to be paid by Highmark to WPAHS over five years."

The amendment to Highmark's original takeover application -- called a "Form A" -- reflects Highmark's agreement, announced last week, to expend "about $600 million" to absorb WPAHS's outstanding 2007 series bonds.

The insurance department, in acknowledging its receipt of the Form A amendment, noted that Highmark's price tag for the WPAHS health system and the assembly of its own in-house health delivery and hospital system had grown to at least $1.6 billion before Highmark figures out what to do with WPAHS's pension obligations.

The filing contains new details about the WPAHS bond deal -- principal and interest payments on the new bonds shall be deferred until July 1, 2015, for example.

Highmark, in its paperwork, said it also "will make an additional $75 million grant to WPAHS in lieu of the $75 million previously committed under the Affiliation Agreement to a special

purpose endowment fund to support medical education."

In other words, the medical education fund becomes a direct grant.

"Both Highmark and West Penn have extraordinary track records in serving health consumers in Western Pennsylvania," state Insurance Commissioner Michael Consedine said in a statement.

But "given the considerable increase in the costs associated with this transaction and the numerous and significant changes proposed, the filing will require close scrutiny to assure that the department's review meets statutory standards," he said in the statement.

The public comment period on the new insurance filing will remain open for at least 30 days.

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Bill Toland: btoland@post-gazette.com or 412-263-2625.


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