PITTSBURGH (KDKA) — A proposed deal to merge Highmark and West Penn Allegheny Health System appears to now be off.

WPAHS called a news conference this morning at their North Shore headquarters to make the major announcement.

It was a deal to save a struggling health system and provide competitive health care in the region, but officials with WPAHS says Highmark reneged on the agreement.

“Instead, Highmark wants a new deal that involves West Penn Allegheny Health System undergoing a bankruptcy process,” WPAHS Chairman of the Board Jack Isherwood said.

Highmark wants WPAHS to clear a billion dollars in debt through bankruptcy, but West Penn says that is not acceptable.

“Bankruptcy is not the first option, it’s really the last option that the board would consider under the circumstances and really the board has – as a not-for-profit board – has a fiduciary responsibility to this community to look at all other options before it considers something as serious as that,” said Dr. Keith Ghezzi, the acting CEO of WPAHS.

West Penn Allegheny also says Highmark is no longer committed to the pension obligation to its 12,000 employees, and for these reasons, they will try to find another partner and is confident it will find one.

“We’re here to stay,” said David McClenahan, a WPAHS board member. “We don’t know exactly what partner will come along because we’ve been prevented from looking at the market because of the affiliation agreement; we now can do that, and that’s what we’re going to do. We’re going to find out what there is in the marketplace, but the notion that there wouldn’t be interest in us is, we think, very unlikely.”

But that remains to be seen, and it’s keeping the door to Highmark open.

“I need to stress that West Penn Allegheny is willing to work with Highmark to find a better alternative to Highmark’s new deal bankruptcy,” said Isherwood. “To us, however, bankruptcy is not the first option, it’s the last option.”

West Penn owns six hospitals including Allegheny General, West Penn, Canonsburg General, Forbes Hospice and Forbes Regional. It also owns seven outpatient care centers.

Following this morning’s press conference, Highmark issued a statement.

It reads in part: “Highmark categorically denies the claim by WPAHS that Highmark has breached its affiliation agreement between us. Highmark continues to believe that an affiliation between Highmark and West Penn is in the best interest of both parties and in the best interest of the community.”



The president of the union for 2,000 West Penn nurses and health care workers issued a statement: “We are deeply alarmed and concerned about the conflict that has developed between West Penn Allegheny Health System and Highmark. We urge both parties to come back to the table.”

Stay with KDKA for the latest on this developing story.

Sources: Highmark In Talks To Buy West Penn Allegheny Health System (4/12/11)
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