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Highmark-West Penn Merger Receives Pennsylvania Approval

The Pennsylvania Insurance Department has approved the affiliation between health insurer Highmark and West Penn Allegheny Health System, both based in Pittsburgh.

West Penn Allegheny Health SystemPennsylvania Insurance Commissioner Michael Consedine made the announcement today and said the approval will now allow Highmark to create its integrated delivery network — named Allegheny Health Network — with West Penn as its flagship.

"Our goal from the outset was to have a comprehensive, transparent review in order to make a fully-informed and well-founded determination. We have met that goal," Mr. Consedine said in a news release. "This is a landmark transaction. We were cognizant that our review and the order we issued today may serve as a model for similar transactions across the state and country going forward."

HighmarkAs part of the deal, the Pennsylvania Insurance Department set several conditions. For example, Highmark must address its contract dispute with University of Pittsburgh Medical Center, set to expire in 2015, and other community hospitals, providers and insurers must have access to Highmark's system.

The approval ends an almost two-year saga between Highmark and West Penn. Highmark initially filed to acquire the financially struggling West Penn in November 2011. The deal looked dead in September 2012 after West Penn officials decided to cancel the merger, claiming Highmark had breached their affiliation agreement by wanting to restructure the health system through bankruptcy.

Highmark salvaged its merger proposal in January when it agreed to purchase West Penn's debt at a discounted rate, thus avoiding any bankruptcy filing. Highmark said it would buy West Penn's more than $700 million in bonds at 87.5 cents on the dollar. That move, in addition to other ancillary costs associated with the transaction, could ultimately cost Highmark more than $1.6 billion — more than three times its original purchase price of $475 million.

West Penn is officially the second part of Highmark's integrated delivery network. In March, 370-bed Jefferson Regional Medical Center in Jefferson Hills, Pa., became part of Highmark's system. Highmark also is looking to add Saint Vincent Health System in Erie, Pa.

More Articles on Highmark and West Penn Allegheny Health System:

Pennsylvania Lawmakers: Highmark-West Penn Deal May Hurt Small Hospitals
Pennsylvania Officials Release Consultant Reports on Highmark-West Penn Deal
Highmark Revenues Surpass $15B

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