Byline: Rebecca Cantwell Rocky Mountain News Staff Writer Rocky Mountain News wire services contributed to this report.
Colorado's biggest health maintenance organization, FHP Health Care, will get a new corporate owner in a $2.1 billion deal announced Monday amid a continuing shakeout in the highly competitive industry .
PacifiCare Health Systems Inc., said it will buy FHP International Corp. for stock and cash in a deal that still needs government and stockholder approval. Both companies are based near Los Angeles.
The two companies plan to combine to form the nation's fifth largest managed care network, with nearly 4 million members in 15 states - and more than $8.6 billion a year in revenues.
Officials say the change won't affect 370,000 Colorado patients, who will continue to see the same doctors and use the same hospitals.
``Down the road, we'll probably see a name change, and we're pros at that,'' said Eric Sipf, president of FHP Health Care.
The organization now known as FHP in Colorado has been known as Comprecare, Peak Health Plan, and Take Care Inc. in recent years.
The competitive marketplace is driving consolidation - and a $9 billion company can offer more than a company half that size, Sipf said.
``Hopefully it will create opportunities for us with more resources that we can devote to development of new products and services to become more competitive and to improve our service to our members,'' Sipf said.
By Oct. 1, FHP will have contracts with all hospitals in metro Denver except St. Joseph's, Sipf said. ``PacifiCare believes, like we do, a key component of our success is relationships with physicians and hospitals,'' said Sipf.
He termed PacifiCare an ``outstanding organization'' that will strive to provide the highest quality health care at the best price. ``I think the combination will be dynamite,'' he said.
While other multibillion dollar health care mergers have been scuttled recently because of conflicts, this one is marked by a willing buyer and seller, said Alan Hoops, chief executive of PacifiCare. The management of his company will be responsible for the combined HMO.
FHP chief executive Bill Price said he will focus on combining the companies, and then isn't sure what he'll do.
Leaders of the two companies stressed they want to increase their Medicare business. Hoops said he'd like PacifiCare's Medicare product, Secured Horizons, to become nationally known. And officials said they expect revenues from Medicare to represent about half the new company's income.
While Wall Street has battered many HMOS lately for not showing enough profit, managed care plans have found it profitable to move into the government program for the elderly.
In Colorado, FHP's biggest Medicare competitor is Kaiser Permanente, the state's second largest HMO, said Allan Baumgarten, publisher of an annual report on Colorado's managed care industry. And the competition is likely to increase for the government program whose cost is rising three times as fast as inflation.
PacifiCare received mediocre grades in the first major consumer report card of California health plans made available to the public in late 1994. The Bay Area Business Group on Health gave PacifiCare B's and C's.
And a local expert said the change might be a bit much for the oft-switching local organization.
``I think there may be some disruption as a result of the merger due to the fact this is the fourth change in the last six years,'' said James Hertel, publisher of ``Colorado Managed Care'' newsletter.
INFOBOX
TOP COLORADO HEALTH PLANS
COMPANY PARTICIPANTS
1. FHP of Colorado 367,054
2. Kaiser Permanente of Colorado 322,751
3. Blue Cross 317,640
4. CIGNA HealthCare of Colorado 164,242
5. United Health Care 160,010
6. Prudential 151,955
7. Aetna 120,617
8. Rocky Mountain 91,885
9. Great West 72,498
10 Antero 70,491
Source: Colorado Managed Care, first-quarter membership except Cigna, which is year-end 1995 data.
