Sign of the times?

Feds scut­tle Mich. Blues ac­qui­si­tion of HMO

Modern Healthcare - - The Week In Healthcare - Gregg Blesch

The U.S. Jus­tice Depart­ment may have sig­naled it’s de­liv­er­ing what providers have long asked for: the stom­ach to scut­tle health plan merg­ers. Or not. Spar­row Health Sys­tem in Lans­ing, Mich., an­nounced last Septem­ber that it was sell­ing its HMO, Physi­cians Health Plan of Mid-Michi­gan, to Blue Cross and Blue Shield of Michi­gan’s HMO sub­sidiary Blue Care Net­work. They’d hoped to close the deal by the end of 2009, pend­ing clear­ance from fed­eral an­titrust au­thor­i­ties and the Michi­gan Of­fice of Fi­nan­cial and In­sur­ance Reg­u­la­tion.

But six months later the Jus­tice Depart­ment and Michi­gan At­tor­ney Gen­eral Mike Cox no­ti­fied the par­ties they in­tended to go to court to block the deal. Last week the deal was called off.

Health in­sur­ers have be­come the Obama ad­min­is­tra­tion’s fa­vorite boogeyman in re­cent weeks. Of­fi­cials de­cried rate hikes and other busi­ness prac­tices as they worked to bol­ster po­lit­i­cal and pub­lic sup­port for a fi­nal, com­pre­hen­sive health­care bill on the brink of pass­ing or im­plod­ing. It’s not clear, how­ever, to what de­gree the Michi­gan case re­flects a tougher stance on health-plan con­sol­i­da­tion or sim­ply the spe­cific cir­cum­stances in Lans­ing.

“This shows a DOJ that’s learned its job as a law en­forcer is to some­times just say, ‘No, it’s not right for you to do this merger,’ ” said David Balto, an an­titrust lawyer and se­nior fel­low at the Cen­ter for Amer­i­can Progress, a left-lean­ing think tank.

“The his­tory of health-in­sur­ance merg­ers over the past sev­eral years is clear. Th­ese merg­ers have led to higher pre­mi­ums, more unin­sured and more prof­its,” Balto said.

The Jus­tice Depart­ment and Cox took credit for the out­come. Chris­tine Var­ney, the Jus­tice Depart­ment’s as­sis­tant at­tor­ney gen­eral for an­titrust, hewed closely to the Michi­gan mat­ter at hand rather than rat­tle a saber at the in­dus­try at large in the depart­ment’s an­nounce­ment. Var­ney pre­vi­ously sig­naled a gen­er­ally more ag­gres­sive ap­proach than was seen un­der the Bush ad­min­is­tra­tion, though without sin­gling out health in­sur­ers as likely tar­gets (June 29, 2009, p. 30).

Cox has been ex­tremely crit­i­cal of Blue Cross and Blue Shield of Michi­gan and ques­tioned how the not-for-profit could af­ford to spend its re­sources on ac­qui­si­tions—$350 mil­lion since 2005, ac­cord­ing to his of­fice—while telling state of­fi­cials they need to raise rates in or­der to re­main fi­nan­cially vi­able.

Be­cause no law­suit was filed, the view of the gov­ern­ment’s facts and al­le­ga­tions are con­fined to its news release. Blue Care Net­work is de­scribed as con­trol­ling 70% of the Lans­ing mar­ket for com­mer­cial health in­sur­ance, and the Jus­tice Depart­ment con­cluded that adding Physi­cian Health Plan’s 41,000 mem­bers and 20% share would have led to “higher prices, fewer choices and a re­duc­tion in the qual­ity” of plans avail­able to res­i­dents and their em­ploy­ers.

Art Lerner, a health­care an­titrust lawyer and part­ner in law firm Crow­ell & Mor­ing, said he be­lieves the Jus­tice Depart­ment’s an­titrust team un­der Obama is in fact scru­ti­niz­ing health-

Lerner: “I will say, from my own ex­pe­ri­ence, the heat is on.”

Cox had been very crit­i­cal of the Michi­gan Blues.

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