Blue Care Network OKs deal for health system : PATRICIA ANSTETT
By: Health Insurance
Submitted: 2009-09-17 10:57:54 | Word Count: 819
Blue Care Network, a Detroit-based HMO and subsidiary of the state’s largest insurer, has signed an agreement to buy the 80,000 member, Lansing-based Physicians Health Plan of Mid-Michigan, a struggling health insurance plan serving a nine-county mid-state region.
The sale of the 29-year-old health system, started by Sparrow Health System of Lansing at a time when hospitals ran insurance companies, requires approval by the state and possibly the U.S. Justice Department.
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It includes three smaller subsidiary companies of Physicians Health Plan, including a Medicaid HMO plan. The sale was announced in separate media telephone briefings today held by the two companies.
Officials at Physicians Health Plan and Sparrow would not disclose the cost of the purchase, while the sale is pending. It was paid for with reserve funds from Blue Care Network; Blue Cross gave no money for the purchase, said Jeanne Carlson, president and chief executive officer of Blue Care Network.
It is the second HMO purchase by Blue Care Network since December 2006, when Blue Care Network and Blue Cross Blue Shield of Michigan - its parent company - paid $225 million for M-CARE, an HMO owned by the University of Michigan.
The new purchase announcement brought questions from Attorney General Mike Cox.
"Blue Cross and its subsidiaries must explain how they can afford to buy another company even as they fight to raise rates on seniors," Cox said in a statement. "Could these funds have been used instead to help avoid rate increases on struggling Michigan residents? Until that question is answered, I will remain skeptical."
Blue Cross and its subsidiaries have spent more than $350 million buying other companies since 2005, Cox said, at the same time it has claimed millions in losses and asked for rate increases on multiple lines of health insurance.
It is not immediately known what will happen to the 132 Lansing-based employees of Physicians Health Plan though officials pledged to help them find jobs at Sparrow or Blue Care Network.
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Subscribers with Physicians Health Plan coverage can continue to use the policies until further notice. The sale won’t be finalized until later this year, possibly next year.
John Berg, executive director, strategic market development for Sparrow Health, said the health system struggled financially last year and the sale will allow it to concentrate on patient care and other core services.
Carlson said the purchase should help hold down health costs by spreading administrative and other spending over a large pool of customers, as she said the M-CARE purchase did.
But Rick Murdock, executive director of the Michigan Association of Health Plans, a Lansing-based HMO trade organization, said the purchase raises concerns that a single company and its subsidiaries will dominate the region and eventually will increase costs. “When we begin to limit choice and eliminate competition, it raises concerns,” Murdock said.
Blue Cross has 4.7 million customers, 70% of the state’s insured population, and Blue Care Network has 680,000 customers.
Scott Wilkerson, president and CEO of Physicians Health Plan, said more than 35 managed care companies offering health insurance in the area. “It’s a very competitive market.”
Subscribers with Physicians Health Plan coverage can continue to use the policies until further notice. The sale won’t be finalized until later this year, possibly next year.
John Berg, executive director, strategic market development for Sparrow Health, said the health system struggled financially last year and the sale will allow it to concentrate on patient care and other core services.
Carlson said the purchase should help hold down health costs by spreading administrative and other spending over a large pool of customers, as she said the M-CARE purchase did.
But Rick Murdock, executive director of the Michigan Association of Health Plans, a Lansing-based HMO trade organization, said the purchase raises concerns that a single company and its subsidiaries will dominate the region and eventually will increase costs. “When we begin to limit choice and eliminate competition, it raises concerns,” Murdock said.
Blue Cross has 4.7 million customers, 70% of the state’s insured population, and Blue Care Network has 680,000 customers.
Scott Wilkerson, president and CEO of Physicians Health Plan, said more than 35 managed care companies offering health insurance in the area. “It’s a very competitive market.”
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