Tuesday, October 28, 2003

Big healthcare merger Two major healthcare mergers, along with the Bank of America/FleetBoston, deal and an arrangement between R.J. Reynolds and British American Tobacco made yesterday the biggest day for mergers and acquisitions since the dot-com bubble. We'll deal here with the bigger of the healthcare mergers. Indiana-based Anthem, one of the largest managed care companies in the US announced it will acquire California-based WellPoint Health Networks for about $16.4 billion (a cash and stock deal). The new company will operate under the WellPoint name but will have its headquarters in Indianapolis. In fact, Anthem is the smaller company. Anthem has a market capitalization of around $11 billion, while WellPoints's is around $12 billion. According to the Wall Street Journal ("Anthem to Acquire WellPoint Health", 10/27/2003). The transaction brings together two of the nation's largest providers of Blue Cross and Blue Shield plans, with about 26 million members. More importantly, it will transform the Blue Cross and Blue Shield name into a truly national brand for the first time. The Blue plans currently operate under license from a nonprofit association but are owned by different companies. The new company will be bigger than rival UnitedHealth, which after its merger with Mid Atlantic HMO will have a little over 20 million customers/members. Both WellPoint and Anthem have a long history of acquisitions as they have grown from single-state Blue Cross/Blue Shield providers to major national managed care chains. While Blue Cross was once existed only as independent state programs, in recent years, there has been a frenzy of acquisitions as one after another has been snapped up by the larger managed care oligopolies. WellPoint started in 1942 as the managed care of Blue Cross/Blue Shield of California. In 1996, WellPoint acquired the health insurance division of Massachusetts Mutual Life Insurance Company. In 1997, that was followed by the group health division of John Hancock Mutual Life Insurance.  In 2000, it bought up PrecisionRx, a mail-order pharmacy, along with Rush Prudential Health Plans of Illinois  In 2001, Cerulean Companies, Inc.-parent company of Blue Cross and Blue Shield of Georgia. In 2002, WellPoint acquired RightChoice, the parent company of Blue Cross & Blue Shield of Missouri and of the Healthlink network.  The company also acquired the MethodistCare HMO in Texas. WellPoint in August 2002 just completed acquiring Cobalt Corp. Cobalt was founded by the merger of Blue Cross & Blue Shield United of Wisconsin and United Wisconsin Services, Inc  Anthem has its origin the 1940s, from a merger of Indiana Blue Cross and Indiana Blue Shield. In 1991, it produced the first cross-state Blue Cross/Blue Shield merger between the Indiana and Kentucky units. It soon expanded its operations to Ohio, Connecticut, New Hampshire, Colorado, Nevada, and Maine.  (It's interesting to note that it beat out WellPoint in acquiring the Nevada and Colorado operations.) The Anthem name was invented in 1997. In 2002, Anthem acquired Trigon Healthcare of Virginia for $4 billion. On the other hand, this August, it got a rebuff when its attempt to acquire Blue Cross & Blue Shield of Kansas was ejected by the Kansas Supreme Court, citing competition reasons. According to the WSJ, "The deal will be one of the year's largest mergers, and is likely to trigger other unions among providers of managed care. In particular, UnitedHealth Group Inc. - another of the big managed-care providers -- has been considered to be on the prowl for acquisitions and may soon be scooping up a regional provider, said other people familiar with the industry.” Most analysts expect that things will not be so great for “members” or medical providers like doctors and hspitals.  Anthem in particular has had a growing number of complaints about its prompt payment for treatments. As an oligonomy, these new healthcare giants can squeeze on both sides to make money, and they tend to squeeze hard. With headquarters remote from the people they serve and less competition all the time, the incentive for good service is slackening. Pieces of the merger Company Divisions WellPoint Blue Cross and Blue Shield of California, Blue Cross and Blue Shield of Georgia, Blue Cross and Blue Shield Uniyted of Wisconsin, Blue Cross and Blue Shield of Missouri, HealthLink (managed care organization that conducts business in the states of Missouri, Illinois, Indiana, Kentucky, West Virginia, Iowa and Arkansas), UNICARE (works with emploteers to procvide a variety of health plans), health insurance assets of Massachusetts Mutual Life Insurance Company, John Hancock Mutual Life Insurance Company, Rush Prudential Health Plans., Golden West Dental & Vision, PrecisionRx (mail-order pharmacy), WellPoint Behavioral Health (mental health care provider), WellPoint Dental Service, WellPoint Pharmacy Management (PBM), WellPoint Workers' Compensation Managed Care Services Anthem Blue Cross and Blue Shield of Indiana, Blue Cross and Blue Shield of Ohio, Blue Cross and Blue Shield of Connecticut, Blue Cross and Blue Shield of New Hampshire, Blue Cross and Blue Shield of Colorado, Blue Cross and Blue Shield of Nevada, Blue Cross and Blue Shield of Maine, Trigon Blue Cross and Blue Shield, Anthem Prescription Management, Anthem Life Insurance Company, AdminaStar Federal (Medicare administrator), Anthem Benefit Administrators 5:54:52 PM

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