Highmark's Allegheny Health Network announces $1B expansion

By JOE MANDAK Markets Associated Press

Highmark Health will spend $1 billion to expand its Allegheny Health Network hospital chain, including a new 160-bed hospital in Pittsburgh's North Hills suburbs, four smaller neighborhood hospitals, and renovations to existing hospitals, the Pittsburgh-based company announced Wednesday.

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Highmark Health, the parent of health insurer Highmark Inc. and its eight-hospital network, announced earlier this year that it's spending $315 million on a new cancer institute at its flagship Allegheny General Hospital in Pittsburgh, and other expansions of its facilities in Erie.

Wednesday's announcement includes $700 million in additional spending to fund the new hospital in Pine Township and four neighborhood hospitals it hopes to open in undetermined locations in the next two years in a joint venture with Emerus, a micro-hospital developer and management firm. The rest of the money will be spent expanding its current hospitals.

The Pine Township hospital, to be known as AHN Wexford, will be built next to the network's Wexford Health & Wellness Pavilion, a medical mall that opened in 2014. Highmark Health plans to break ground on the new hospital next year and open it in 2021.

Allegheny Health Network and Emerus will split the cost of building the neighborhood hospitals, after which Emerus will manage them. The neighborhood hospitals will each offer 10 to 12 short-stay, inpatient beds, an emergency room, clinical services. The neighborhood, or micro, hospitals are larger and more diverse than urgent care centers and are fully licensed as hospitals and thus able to accept some patients who need short-term hospital care.

Emerus, based in The Woodlands, Texas, already operates more than 26 facilities in the United States and has 25 more in development. It has already partnered with other hospital networks, including Dignity Health, Baptist Health, SCL Health, Hospitals of Providence and Baylor Scott & White Health, but the joint venture with Allegheny Heath will be its first in Pennsylvania.

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The announcement and new investments are the latest move by Allegheny Health Network to compete with the much larger University of Pittsburgh Medical Center network, which also has its own health insurance plan. Allegheny Health has about 17,000 employees.

Highmark Health has said it had operating losses of $565 million in 2015, nearly all of it because of massive losses by its health plans marketed under the Affordable Care Act, and had an operating profit of $64 million in 2016.

In 2015, Allegheny Health Network lost $36 million and Highmark's ACA marketplace plans lost $655 million, though other sectors of the company were profitable.

UPMC has more than 80,000 employees and more than 30 hospitals.

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This story has been corrected to show the $565 million loss was in 2015, not in 2016.