News of Pittsburgh-based West Penn Allegheny Health System nixing its $475 million pending merger with Highmark came as a surprise Friday, but unease between the organizations may have stemmed from the firing of the payor's CEO in April, according to a Pittsburgh Post-Gazette report.
Former Highmark President and CEO Kenneth Melani, MD, was placed on administrative leave and later fired after he was charged with assault and trespassing, the aftermath of an altercation with his girlfriend's husband. William Winkenwerder Jr., MD, replaced Dr. Melani, but the change in leadership reportedly affected the Highmark-West Penn relationship, according to the report.
Dr. Melani completed his medical residency at West Penn, which reportedly left him with a strong connection to the financially troubled health system. He also maintained tight ties to physicians in the Pittsburgh medical community and was influential in recruitment efforts. Dr. Melani had firmly rejected ideas of a West Penn bankruptcy and said it would be destructive and disruptive to the community, according to the report.
Dr. Winkenwerder, a former assistant secretary of defense for health affairs during President George W. Bush's administration, brought an outside perspective to the merger when he began his duties in mid-July. He decided West Penn was too financially risky for Highmark to take on unless it filed for Chapter 11 bankruptcy to restructure its debt, according to the report. He disclosed this decision to West Penn officials during an Aug. 30 meeting.
West Penn officials took that proposal as a breach to the organizations' affiliation agreement and consequently called off the merger. The chairman of West Penn's board, Jack Isherwood, said bankruptcy "is not the first option, it's the last option," according to an earlier report. He also said West Penn's proposed alternatives to bankruptcy were met with "tepid" interest.
West Penn has said it is now looking for a new partner and is open to a range of suitors, including non- and for-profit health systems or hospitals, as well as insurance companies. In a statement released Friday, Highmark said it continues to believe an affiliation is in the best interest of all parties.
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Former Highmark President and CEO Kenneth Melani, MD, was placed on administrative leave and later fired after he was charged with assault and trespassing, the aftermath of an altercation with his girlfriend's husband. William Winkenwerder Jr., MD, replaced Dr. Melani, but the change in leadership reportedly affected the Highmark-West Penn relationship, according to the report.
Dr. Melani completed his medical residency at West Penn, which reportedly left him with a strong connection to the financially troubled health system. He also maintained tight ties to physicians in the Pittsburgh medical community and was influential in recruitment efforts. Dr. Melani had firmly rejected ideas of a West Penn bankruptcy and said it would be destructive and disruptive to the community, according to the report.
Dr. Winkenwerder, a former assistant secretary of defense for health affairs during President George W. Bush's administration, brought an outside perspective to the merger when he began his duties in mid-July. He decided West Penn was too financially risky for Highmark to take on unless it filed for Chapter 11 bankruptcy to restructure its debt, according to the report. He disclosed this decision to West Penn officials during an Aug. 30 meeting.
West Penn officials took that proposal as a breach to the organizations' affiliation agreement and consequently called off the merger. The chairman of West Penn's board, Jack Isherwood, said bankruptcy "is not the first option, it's the last option," according to an earlier report. He also said West Penn's proposed alternatives to bankruptcy were met with "tepid" interest.
West Penn has said it is now looking for a new partner and is open to a range of suitors, including non- and for-profit health systems or hospitals, as well as insurance companies. In a statement released Friday, Highmark said it continues to believe an affiliation is in the best interest of all parties.
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