As part of deal, High­mark to di­vest Medi­care ad­min­is­tra­tor

Modern Healthcare - - LATE NEWS -

High­mark’s board of di­rec­tors agreed to di­vest its Medi­care claims ad­min­is­tra­tor as part of its strat­egy to ac­quire West Penn Al­legheny Health Sys­tem. High­mark reached a deal to sell its sub­sidiary High­mark Medi­care Ser­vices to the Blue Cross and Blue Shield of Florida sub­sidiary Di­ver­si­fied Ser­vice Op­tions. David O’brien, ex­ec­u­tive vice pres­i­dent at High­mark, told re­porters as the deal was an­nounced that fed­eral of­fi­cials’ con­cerns about po­ten­tial con­flicts of in­ter­est prompted the sale. Own­ing providers and pay­ing them through an owned sub­sidiary would cause the CMS “heart­burn,” O’brien said. Terms of the deal were not dis­closed. O’brien said High­mark Medi­care Ser­vices’ op­er­a­tions to­taled $100 mil­lion in an­nual rev­enue and in­come of $1 mil­lion to $2 mil­lion. The deal is ex­pected to close around Jan. 1. O’brien said High­mark ap­proached the CMS about the in­sur­ers’ strate­gic di­rec­tion. High­mark of­fi­cials be­lieved the fed­eral agency’s con­cerns would in­hibit growth for the Medi­care claims ad­min­is­tra­tor. The deal would in­crease busi­ness vol­ume for Di­ver­si­fied Ser­vice Op­tions, which would help the com­pany pro­vide more cost-ef­fec­tive claims ad­min­is­tra­tion, Sandy Cos­ton, CEO of Di­ver­si­fied Ser­vice Op­tions, said in a news re­lease an­nounc­ing the deal. com­pa­nies most likely to pur­sue ac­qui­si­tions, buy­backs or div­i­dends are those that man­u­fac­ture prod­ucts con­sid­ered vul­ner­a­ble to consumer de­mand, such as or­tho­pe­dic im­plants, and com­pa­nies deal­ing with prod­uct con­cerns about safety, ef­fi­cacy and ap­pro­pri­ate use. Sev­eral man­u­fac­tur­ers, in­clud­ing Bos­ton Sci­en­tific Corp., Medtronic and St. Jude Med­i­cal, have been hurt by a fed­eral in­ves­ti­ga­tion into the use of im­plantable car­dioverter de­fib­ril­la­tors, Moody’s said (April 25, p. 14). Also, hos­pi­tals are in­creas­ingly co­or­di­nat­ing with physi­cians to cut costs on ex­pen­sive items pre­ferred by physi­cians, such as stents, ICDS and or­tho­pe­dic im­plants. “De­vice­mak­ers have re­lied on prod­uct in­no­va­tion to sell premium prod­ucts that can gar­ner higher pric­ing than ex­ist­ing prod­ucts,” Moody’s said. “We be­lieve that it will be­come tougher for this strat­egy to suc­ceed.”

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