State eyes West Penn Allegheny Health System's $1 billion debt in Highmark deal
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Officials at Highmark Inc. have submitted documents to the state attorney general regarding the Pittsburgh insurer's planned acquisition of the West Penn Allegheny Health System and the system's $1 billion-plus debt in bond and pension obligations.
Since the June 28 announcement that Highmark intended to buy West Penn Allegheny, officials for both organizations have been working out details behind closed doors and without public comment.
But Steve Foreman, associate professor of health administration and economics at Robert Morris University, says West Penn Allegheny's $800 million bond debt may have to be addressed before the purchase is completed.
"If I were doing this deal, I would put West Penn Allegheny through bankruptcy and get rid of that debt," he said.
What's more, he added, Highmark may have little choice.
Based on actions taken by attorneys general in other states in which a nonprofit entity tried to change its organizational structure, he said, the attorney general's office may consider Highmark's bountiful reserves a "community asset" -- money that should be used to further Highmark's core mission of providing insurance and moderating premium costs for local residents, rather than pulling a health system out from under a mountain of debt.
"Can they take money from their health insurance operation and invest it in a hospital?" Mr. Foreman asked. "If I were the judge on this case, I'm not sure how I would rule."
"The goal and the responsibility for the office of the attorney general is to review the transaction to ensure that charitable contributions and charitable assets are safeguarded," said attorney general spokesman Nils Frederiksen, who declined to give specifics about the submitted material.
While Attorney General Linda Kelly could raise objections to any part of the proposed deal, final approval or disapproval "for any matter that involves structural change to a charitable nonprofit" would be decided in Orphan's Court, Mr. Frederiksen said.
First Published August 11, 2011 12:00 am
