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Health insurer Highmark asks court to block West Penn deal talks

(Reuters) - Health insurer Highmark Inc wants a state court to block any possible deal talks with rivals involving Pennsylvania's West Penn Allegheny Health System, which last week ended a planned $475 million alliance with Highmark.

One of the 10 largest U.S. health insurers, with 4.9 million people on its rolls, Highmark said in a news release on Tuesday that it had asked a Pennsylvania Court of Common Pleas for a temporary restraining order to keep West Penn from pursuing affiliation or acquisition talks with third parties.

Pittsburgh-based Highmark, which is readying for major shifts in healthcare funding under U.S. reforms by assembling an integrated health-delivery network, and West Penn struck an affiliation agreement last November.

In ending the planned alliance, non-profit West Penn said Highmark had not lived up to the terms of the affiliation agreement and had insisted that financially strapped West Penn restructure its debt through bankruptcy.

The lawsuit also asks that West Penn immediately repay $200 million in grants and loans provided by Highmark.

A spokesman for Highmark was not immediately available to comment. The company has denied violating the terms of its affiliation and described a possible financial restructuring as just one potential route for improving West Penn's finances.

Last Friday, after West Penn announced the termination of the alliance, Moody's Investors Service and Fitch Ratings warned they may cut credit ratings on West Penn, a regional operator of five hospitals and other healthcare and research facilities.

Moody's placed its Caa1 bond rating for West Penn on review for a downgrade. Fitch also put the system's B-plus rating on rating watch negative. About $737 million in outstanding revenue bond debt issued by the Allegheny County Hospital Development Authority in 2007 is affected by the actions.

(Reporting by Michael Connor in Miami; Editing by Leslie Adler)

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