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DOJ Closes Antitrust Investigation into West Penn – Highmark Deal

The U.S. Department of Justice's Antitrust Division announced Tuesday that it has closed its investigation into Highmark's affiliation agreement with West Penn Allegheny Health System (WPAHS). The D.O.J. launched the antitrust investigation in February.

In a written statement the Antitrust Division announced, "After a thorough review of the affiliation agreement and other evidence collected by the Antitrust Division in its investigation, the division has determined that the affiliation agreement likely will not reduce competition in the markets for hospital, physician or health insurance services."

The statement went on to read that it is more likely that the opposite is true. "The proposed affiliation holds the promise of bringing increased competition to western Pennsylvania's health care markets by providing WPAHS with a significant infusion of capital and increases the incentives of market participants to compete vigorously."

Highmark is the Blue Cross and Blue Shield licensee in the Pittsburgh market, and WPAHS is the second-largest hospital network in the region behind the University of Pittsburgh Medical Center (UPMC).

Highmark and WPAHS announced its intent to merge in June of 2011 and finalized an affiliation agreement in November. The deal called for the creation of a new nonprofit parent company to hold the entities. As part of the deal, Highmark has agreed to infuse up to $475 million into WPAHS. Justice Department approval is one of the necessary steps before the agreement can be formalized.

Today's statement concludes with, "Finally, the affiliation agreement likely will not facilitate horizontal collusion by health plans because new entrant national insurers are for the first time in many years aggressively attempting to reduce Highmark's dominant market share… The division will continue to monitor developments in the Pittsburgh health care market as part of our broader commitment to vigilantly enforce the antitrust laws and thereby protect competition in our nation's health care markets."

Highmark has responded to the announcement with its own written statement, which reads in part, "We are pleased that the U.S. Department of Justice, after a thorough review, has determined that the proposed Highmark - West Penn Allegheny Health System affiliation will not reduce competition… Highmark looks forward to full competition among health insurers and providers in the western Pennsylvania health care marketplace."

The insurer took the opportunity to speak to a larger issue: "Highmark is looking forward to next week's Pennsylvania Insurance Department public hearing to discuss the proposed change in control of Highmark and its Pennsylvania insurance subsidiaries, which is necessary for our proposed affiliation with the West Penn Allegheny Health System. We are seeking prompt Department approval of our filing…"