WPAHS bankruptcy push was move toward regulatory approval, Highmark CEO testifies

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Highmark Inc. president and chief executive officer William Winkenwerder Jr. testified in Common Pleas Court today that he and his senior management team urged West Penn Allegheny Health System board members to restructure their near-$1 billion debt in order to improve the chances that the Pennsylvania Insurance Department would approve their affiliation.

While the insurance department did not require a bankruptcy filing, Dr. Winkenwerder said, Highmark officials learned in late July that the department had secured bankruptcy experts.

"We had very serious beliefs based on the feedback we received that we needed to address the issue of operational performance and indebtedness," he said.

Insurer Highmark is in court seeking to block West Penn Allegheny's bid to talk to other possible affiliation partners during the final six months of the affiliation agreement the two signed a year ago. WPAHS maintains that Highmark breached that agreement by insisting West Penn Allegheny enter into bankruptcy to get out from under its debts.

In direct testimony this morning while answering questions from Highmark's attorney, Daniel I. Booker of Reed Smith, Dr. Winkenwerder denied telling WPAHS officials that Highmark would not go through with the affiliation even if state officials approved it.

He also denied ever saying that he believed Highmark had overpaid for West Penn Allegheny.

Highmark committed $475 million to West Penn Allegheny as part of its plans to construct a $1 billion integrated health care delivery system to compete with UPMC.

Dr. Winkenwerder took the helm at Highmark on July 17 after the insurer's board fired his predecessor, Ken Melani. As it was for Mr. Melani, the affiliation remains Dr. Winkenwerder's top priority, he testified.

He said Highmark offered West Penn Allegheny "significant financial incentives" to go through a structure reorganizing, including $75 million in interim financing and accelerated payments on the remaining $275 million of the $475 million it had committed to WPAHS. He said their plan also would protect the pension of WPAHS employees.

Testimony is scheduled to resume this afternoon.

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


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