West Penn lost $370.8 million in the year ended June 30, 2013, significantly more than the $137.6 million net loss originally recorded in October.
A $214.7 million “goodwill impairment” was the reason for the increased losses. A health system or company records a goodwill impairment if the fair market value of its assets diminishes greatly. Last April, the Pennsylvania Insurance Department approved the affiliation between Blue Cross Blue Shield subsidiary Highmark and West Penn. The green light ended an almost two-year saga between Highmark and West Penn, but it brought about much scrutiny, which resulted in a deflated value and, consequently, the goodwill impairment.
Liz Allen, interim CFO of Allegheny Health Network, the health system created by Highmark and that now includes West Penn, told the Pittsburgh Post-Gazette the accounting measure was not a surprise and was actually a requirement. “We expected this to happen,” she said.
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