West Penn Allegheny Health System claims it’s losing its shirt because its larger rival, the University of Pittsburgh Medical Center has colluded with Highmark, the area’s leading private insurer to drive it out of business.

So it filed suit in federal court against both of ‘em.

West Penn’s accusations cite numerous activities since 2002 that ensured Highmark’s dominance while guaranteeing juicy payouts for UPMC.

“West Penn is running out of options,” Jan Jennings commented to the Pittsburgh Post Gazette. The CEO of American Healthcare Solutions added, “you don’t sue UPMC and Highmark, with the deep reserves of cash they both have, unless you’re desperate.”

UPMC released a statement saying it “unequivocally denies the allegations,” and that the filing is an attempt by West Penn Allegheny “to divert attention from (its) operating and financial difficulties.”

Last year, WPA took a $73 million write down caused by an overestimation of revenues derived from patient care. A month ago, the system reported operating losses of $9.1 million and a Q4 2008 net loss of $5.6 million.

Highmark officials announced they were “surprised and disappointed” by the lawsuit, while citing their recent$125 million loan to West Penn and multiple grants they provided to “strengthen (West Penn’s) administrative and information systems.”

West Penn claims the 2 organizations have “engaged in mutual back-scratching designed to preserve Highmark’s monopoly in health insurance and to permit UPMC to build a monopoly in sophisticated … health care in this region,” according to David McClenahan, its board chairman.

“I can’t judge the arguments. I just know these kinds of cases in general are very hard to prove,” Jennings opined.