The West Penn Allegheny Health System hopes to get regulatory approval for its affiliation with insurer Highmark by the fall and, if that goes through, it expects to be on solid financial footing within two to three years, interim president and CEO Keith T. Ghezzi said Thursday.
But the new West Penn chief cautioned that getting there will require incremental steps, starting with the expected reopening of West Penn Hospital's emergency department in Bloomfield by the end of March and continuing efforts to recruit more physicians.
Dr. Ghezzi, who took the position three months ago and met with reporters at the system's North Side offices on Thursday to discuss the status of the planned turnaround of West Penn, said the health system is "very close" to announcing some key medical staff hires who also will help get the changes on track.
In the past month, he said, the health system's executives have met with state Department of Insurance officials to discuss the planned affiliation with Highmark, the region's largest insurer that has committed $475 million to stabilize the ailing health system.
"We're hearing that they want to do a comprehensive and thorough review" and expect to hold public hearings in the spring, he said.
Dr. Ghezzi said the health system has asked state officials to move as quickly as possible, noting West Penn's goal is to have the necessary approvals by September.
Meanwhile, he said WPAHS is moving ahead with streamlining its operations, looking at ways to reduce costs in back office areas such as human resources once it joins forces with Highmark. "Being more efficient," he emphasized, "does not necessarily mean cutting. It means flexing as much as possible. We have to be nimble."
In fact, in addition to returning West Penn to full power, Dr. Ghezzi said the management may look at reopening the emergency room at its Suburban campus in Bellevue. "I think each of our hospitals will play a role."
Key to returning WPAHS to financial strength will be reversing the current decline in patient volume. With the reopening of West Penn's emergency department, "We think there's an opportunity to win that volume back" with a combination of high quality care at lower cost than crosstown rival UPMC.
Another point in West Penn's favor, he said, is its recent affiliation with Premier Medical Associates in Monroeville, the area's largest multi-specialty independent physician practice, which will help retain patients in the system.
Physician recruitment is critical to both health systems, because that can drive patient volume. WPAHS estimates it has hired about 50 physicians since July 1 for a total of 640 employed physicians. In a financial statement released Thursday, UPMC reported that it has hired nearly 400 doctors during that period and now employs 3,240.
As for the looming battle for patients in Monroeville with the expected opening of UPMC East just down the road from West Penn's Forbes Regional this summer, Dr. Ghezzi said the health system anticipates losing some patients at first.
But, he said, "We're confident we're going to be able to hold our own" because of the broader services Forbes offers. Forbes has applied for Level II trauma center designation that would allow it to treat complex trauma cases rather than transferring those patients into the city.
West Penn Allegheny has been buffeted in recent years with discouraging financial results and bond rating downgrades. A Dec. 30 audit by accounting firm KPMG raised questions about West Penn Allegheny's "ability to continue as a going concern," although Highmark President and CEO Kenneth Melani later stated that Highmark does not intend to let the health system fail.
The audit report stated that WPAHS had $1.35 billion in liabilities and deficits, and $1.25 billion in assets. The system also had $51.8 million in operating losses in the 2011 fiscal year that ended June 30. For the July-September period, West Penn Allegheny lost $21.8 million, saw inpatient discharges decline 12.7 percent and net patient revenue decline 5.5 percent.
Dr. Ghezzi noted the audit came out only a couple of months after the current administration took over, so the efficiencies and improvements being instituted would not come into play. He did say the health system's loan debt service of $50 million a year is manageable.
As for ratings agencies, Dr. Ghezzi said they look at past performance and, because of very public misses with companies such as Enron and failing to anticipate the 2008 economic collapse, "They are going to be conservative."
West Penn Allegheny will release financial results for the September-December period at the end of this month.
Prior to joining West Penn Allegheny as interim president and CEO, Dr. Ghezzi was a managing director for Alvarez & Marsal Healthcare Industry Group in Washington, D.C.. The organization had been hired as consultants to help turn the financially ailing health system around.
Dr. Ghezzi is board certified in emergency medicine and has a master's degree in business administration from the Wharton School at the University of Pennsylvania.
He was appointed by WPAHS three months ago. He has committed to staying at least one year through the regulatory approval process with Highmark and subsequent transition, but responded, "I don't know," when asked if he would stay if offered a permanent position heading a financially stable West Penn Allegheny system.
"I am an emergency physician," he said. "I like to fix things."
Steve Twedt: firstname.lastname@example.org or 412-263-1963. First Published February 3, 2012 5:00 AM