West Penn Allegheny Health System told investors on Wednesday that it is cooperating with a Securities and Exchange Commission review of the system's finances.
Officials at the region's second-largest hospital network said the SEC is conducting an "informal inquiry" after the disclosure in late July that payments from patients and vendors were overstated by about $73 million.
"West Penn Allegheny Health System is fully cooperating with the inquiry," spokesman Tom Chakurda said.
West Penn Allegheny received a letter from the SEC this month, he said.
In recent weeks, West Penn Allegheny has said it expects to post significant losses as a result of the recently revealed accounting mistake. Its most recent financial statements show the network lost $15.6 million during the first nine months of the fiscal year that ended June 30.
West Penn Allegheny, which refinanced about $752 million in bonds last year, yesterday held a closed-door meeting with investors to explain the plans to stabilize its finances.
The meeting at Allegheny General's North Side campus was closed to the public and media. It was led by CEO Christopher T. Olivia and Roy T. Santarella, executive vice president and chief administrative officer.
"They did a very effective presentation," said Jeff Schaub, senior director of New York-based Fitch Ratings, which downgraded West Penn Allegheny's rating after the accounting mistake was revealed. "They gave everyone a good understanding of what the problem was and how it's being corrected."
Olivia and other executives who led the meeting declined requests for an interview through Chakurda.
Schaub, one of dozens of investors who listened to the presentation, said West Penn officials explained it will take longer than expected to implement recommendations from a consultant hired to streamline operations.
The consultant, Chicago-based Wellspring Partners, has told West Penn Allegheny it can achieve about $50 million in savings by implementing its recommendations.
Officials have not said whether those recommendations involve layoffs or closing hospitals. Olivia in recent months has restructured his immediate management team. He also has begun consolidation of several programs at flagships Allegheny General in the North Side and West Penn in Bloomfield.
It could be nine to 12 months before any operational changes are made, according to Schaub, who added that no details were provided by West Penn Allegheny administrators.
