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HealthAmerica sues AGH, 3 others

Wednesday, August 12, 1998

By Pamela Gaynor, Post-Gazette Staff Writer

Coventry Corp., parent of the region's second largest managed care insurer, HealthAmerica of Pennsylvania, said yesterday that it has filed a $108 million lawsuit against Allegheny General Hospital and three related Western Pennsylvania health care institutions.

In a news release, Coventry, based in Bethesda, Md., said that it asked Allegheny County Common Pleas Court for an order "compelling the hospitals to fullfill their contractual obligations to provide health care services to HealthAmerica's 290,000 members in Western Pennsylvania."

Allegheny General's parent foundation is trying to shield all four of the institutions named in the suit from its massive bankruptcy case, which is centered on its operations in Philadelphia. In addition to Allegheny General, the suit targets Forbes Health System, Canonsburg Hospital and Allegheny Valley Hospital.

The HealthAmerica suit is the first clear indication that creditors, one way or another, are likely to seek damages from the Western Pennsylvania institutions even though it's AHERF's Philadelphia hospitals that are in bankruptcy.

Lawyers close to the case have said that other creditors may even seek to drag AHERF's hospitals in this region into the case, arguing, among other things, that funds were transferred back and forth across the state.

AHERF spokesman Tom Chakurda said the foundation had not yet received a copy of the suit. But he said officials were surprised by the news release "since none of the institutions named owe HealthAmerica money."

"Our physicians and hospitals have always cared for patients with HealthAmerica insurance, notwithstanding the fact that we have not been paid for these services since March," he said.

Chakurda declined to elaborate as to why AHERF itself had listed HealthAmerica as its largest creditor in its July 21 filing if it or its affiliates were the ones that were owed money.

AHERF listed HealthAmerica as its second largest creditor, estimating that it owed the insurer $16 million. HealthAmerica believes it is owed substantially more than that. Chakurda said AHERF's hospitals here would continue to treat Health America patients "pending early resolution of these differences."

HealthAmerica is the second largest health plan that Nashville, Tenn. -based Coventry operates. Its potential losses in the AHERF bankruptcy have already pummeled Coventry's stock price and forced it to take charges against its earnings that put it in technical violation of its own loan agreements.

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