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Highmark and West Penn Allegheny Merge, ER to Reopen at West Penn

It is official: health insurer Highmark Inc. is entering the provider market through a formal agreement with West Penn Allegheny Health System (WPAHS). In June, the two organizations announced tentative plans, and Monday they signed the "agreement to affiliate." Not only does the deal throw the financially anemic WPAHS a lifeline, it also means that the Emergency Room at West Penn Hospital in Bloomfield will reopen in 2012. The E.R. closed in January of this year.

At the press conference, J. Robert Baum, Chair of Highmark's board, Ken Melani, president and CEO of Highmark, Jack Isherwood, Chair of WPAHS' Board, and Keith Ghezzi, Interim CEO of WPAHS, praised the merger. The next step is the approval process which requires the consent of the Pennsylvania Insurance Department, Pennsylvania Attorney General, and the IRS. Baum called it a "thorough process," but says that the merger is a "compelling story." Melani said that story includes saving a community asset with a workforce of 12,000, offering competition in the health care sector, and growing resources for an aging population.

Melani was the point man for questions and comments about the simmering tension between Highmark and health care provider/insurer University of Pittsburgh Medical Center. When Highmark moved to affiliate with WPAHS, UPMC cut off talks on extending health care contracts with Highmark. UPMC has said its physicians and facilities, including specialty practices like the Hillman Cancer Center and Magee Women's Hospital, would continue to be available to Highmark clients, but only at out-of-network prices.

Melani says that continuing Highmark's contract with UPMC is about capacity and choice.

"Everybody in this community deserves both of those, whether you carry an Aetna card, a United card, a Highmark card, or a UPMC card. It's that simple. You should have some choice, and you should have access to the not-for-profit assets, and you should be allowed to decide where you go," said Melani. Legislation in the State House would compel UPMC to make its specialty practices available to other health care insurers and providers at in-network prices.

Money and Organization

Highmark provided $50 million to WPAHS earlier this year to keep the system afloat. The insurer will grant another $350 million to WPAHS, and $75 million more to start up a medical school. In all, Highmark says it's making a financial commitment to the new deal of up to $475 million.

Layers of boards would control the new Highmark insurer/provider. The ultimate board will be at the 501c3 level; below it would be the insurance company board and a provider board, which is a 501c3. Beneath the provider board would be a board for each of the entities. WPAHS will maintain its own board, which will be populated by both Highmark and WPAHS members.

The Highmark provider organization will be lead by John Paul, a former UPMC executive. WPAHS includes five hospitals: Allegheny General on the North Side, West Penn in Bloomfield, Allegheny Valley in Natrona Heights, Canonsburg General in Canonsburg, and Forbes Regional in Monroeville, as well as a physicians group practice.