Highmark announces intent to affiliate with Erie's Saint Vincent

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Pittsburgh health insurer Highmark Inc. is closer to making its long-anticipated move into the Erie market, announcing this morning a non-binding letter of intent to affiliate with Saint Vincent Health System.

The two parties hope the final deal will be in place by the end of this year. The partnership would allow Highmark to appoint 75 percent of the Saint Vincent board.

"Saint Vincent has been looking for a strategic partner for several years," Scott Whalen, president and chief executive of Saint Vincent said, adding that it would be difficult for independent hospitals to remain independent in the years to come.

In the proposed deal, Highmark pledges $5 million for capital projects, tens of millions in annual, ongoing contributions for system upgrades, and $20 million to stabilize Saint Vincent's balance sheet. Highmark said the deal is worth $65 million over three years.

The Pittsburgh Post-Gazette reported in May that Highmark was in discussions to affiliate with or acquire the Saint Vincent Health System, a 427-bed Catholic hospital that serves the Erie market as well as parts of Ohio and New York.

The letter allows the companies to move forward with the affiliation. The Saint Vincent board of trustees voted unanimously Monday night to sign the deal.

"This is great news for the families and individuals who receive care at Saint Vincent," Highmark CEO William Winkenwerder said.

Highmark already has a stake in the Lake Erie Medical Group, a hospital physicians practice in Erie that is affiliated with Saint Vincent. The group was created by Highmark to serve physicians in the Erie area, where rival UPMC already owns a hospital, UPMC Hamot.

The announcement marks Highmark's third major proposed affiliation agreement as it continues to build its health provider wing, in attempt to compete with UPMC by buying up hospitals and building medical malls.

Last year, Highmark and Pittsburgh's West Penn Allegheny Health System announced their partnership -- a marriage now and the rocks after WPAHS said on Sept. 28 it was canceling the agreement, accusing Highmark of trying to force it into bankruptcy.

Earlier this year, Highmark signed a deal with Jefferson Regional Medical Center in Jefferson Hills, a deal that gave Highmark control of Jefferson's board of directors in exchange for cash and contributions to Jefferson's charitable foundation.

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


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