State approves $1B Highmark-West Penn deal

Highmark can forge ahead with its planned purchase of West Penn Allegheny Health System, which it intends to use as the foundation of a new integrated health network to compete against rival UPMC.

Although Highmark first announced its intended takeover of West Penn in June 2011--which will now cost the insurer about $1.1 billion--the Pennsylvania Insurance Department began reviewing the plans a few months later, providing approval of the affiliation on Monday.

"This is a landmark transaction," Insurance Commissioner Michael Consedine said in an announcement. "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."

After Consedine's announcement, Highmark said the new integrated delivery system, now named Allegheny Health Network, will be led by John Paul, who has served as head of Highmark's health wing. Paul said in a statement that the Allegheny Health Network will "create more healthcare choice and a greater focus on individual wellness and disease prevention."

However, the approval does come with certain conditions, including that Highmark must promote competition and help reduce premiums, enhance local community hospitals, as well as limit adverse effects on insurers and providers contracting with Highmark and West Penn. "Our safeguards, and the department's continuing oversight, will continue to protect insurance consumers as this affiliation begins to reshape the healthcare marketplace in Western Pennsylvania," Consedine said.

To learn more:
- here's the state's announcement
- read the Highmark statement

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