West Penn Allegheny Health System chief looks to the future

Outlook: Stable

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Still fighting to right its financial ship, West Penn Allegheny Health System faces a difficult year of transition and consolidation, according to president and CEO Christopher Olivia, who described the health system's current status as "stable but not secure."

In a wide-ranging discussion Tuesday with local media, Dr. Olivia laid out what he called a "reformatting" of the region's second largest health system, one that will place more emphasis on ambulatory centers and less on inpatient care in large buildings.

The system already has moved in that direction, with an ambulatory care center opening in Peters next year and plans to open others in coming years. And in June, WPAHS officials announced that many services at West Penn Hospital in Bloomfield would be moved to Allegheny General on the North Side, a consolidation expected to result in the loss of up to 1,500 jobs early next year.

"I didn't come here to lay off 1,500 people. It's painful, it's extremely painful, but it needs to be done to get where we need to be," said Dr. Olivia, who took the reins at WPAHS in 2008 and almost immediately had to deal with a $73 million write-down when it was discovered the health system had previously overestimated patient revenue.

Currently, he said, management is trying to match employees with possible openings. Workers won't know until later this fall if they will be let go. Dr. Olivia said they expected to retain most of the nurses "and a significant number of others, but we won't be able to take all."

He acknowledged the uncertainty had created anxiety among WPAHS staff.

"We had two choices in this. We could have made the announcement right before [a major layoff], and that's been done in this marketplace. We wanted our people to have as much lead time as possible. We felt honor bound to do that."

Dr. Olivia was apparently referring to the University of Pittsburgh Medical Center's decision to close UPMC Braddock Hospital in January on three months' notice. Last week, UPMC officials said 85 percent of that hospital's employees had found new jobs within the UPMC system, as have 97 percent of UPMC South Side employees after that hospital was converted into an urgent care facility last year.

WPAHS will not release fiscal 2010 financial results until October. For the first nine months of the fiscal year that ended June 30, it saw a $7.2 million net profit but an $11.6 million operating loss. Shortly afterward, both Moody's and Standard & Poor's downgraded the WPAHS bond rating, already at junk status.

Dr. Olivia, however, said the health system was in better financial shape than it was a year ago and much better than two years ago. "When your financial situation improves and you get downgraded, that tells you one thing -- the [rating] criteria are more stringent."

Moody's has projected the health system would have to make a $43 million payment to its pension fund this fall. While not confirming the number, Dr. Olivia said the health system expected to meet its pension obligations.

He also shot down speculation that WPAHS is in affiliation discussions with Cleveland Clinic or any other party.

"We would be open to ways we can enhance our service delivery," he said, but the health system has not been approached by anyone for possible affiliation. "We're not seeking that either," he said.

The goal, he said, is to get the health system's bond rating up to investment grade this decade, "but we hope to do it much sooner than that."

With one-time costs associated with the ongoing consolidation to absorb, signs of a turnaround could be two years away. Other factors in the equation include the health care reform rollout and continuing high unemployment in the region, which translates into more uninsured patients.

But Dr. Olivia expects that WPAHS, including West Penn Hospital, will be intact five years from now. "We don't know exactly how the mix of services will work out," he said.

"For some reason, there's an element in this community that wants to promote our death. I don't get that," Dr. Olivia said. It is important that the Pittsburgh region have more than one provider, he said. "We've come a long way. I'm heartened by the progress, but we still have much to do."

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


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