In an effort to secure a top position in Philadelphia's managed-care marketplace, Independence Blue Cross and Graduate Health System have agreed to merge their for-profit operations into a new subsidiary.
The new Inde pendence Blue Cross subsidiary initially will link the insurer's four managed-care plans, including its 520,000-en rollee HMO, Keystone Health Plan East, with Graduate's 75,000-en rollee HMO, Greater Atlantic Health Service. Other for-profit subsidiaries will be added, too. For example, Graduate has a home healthcare firm and a company that owns and manages physician practices.
Eventually, Graduate's seven hospitals will be incorporated into the new company. They include four Philadelphia hospitals, one in Reading, Pa., and two in New Jersey.
"The result will be the creation of a vertically integrated delivery system offering a comprehensive package of healthcare benefits in a managed-care environment that delivers quality care at the best possible price," said G. Fred DiBona Jr., president of Independence Blue Cross.
However, the new company will not include the largest share of the insurer's business. Some 68% of Blue Cross's 2.27 million subscribers are covered by its not-for-profit indemnity insurance plans.
Mr. DiBona said the deal with Graduate will "not affect relationships with other providers" or "subscriber rights to choose those providers."
Harold Cramer, Graduate's chairman and chief executive officer, said the relationship with Independence is an extension of efforts by the Philadelphia-based healthcare system to build an integrated delivery network.
Mr. DiBona will serve as chairman and CEO of the new company, and Mr. Cramer will be president. Other details of the governance structure have yet to be nailed down.
Definitive agreements are expected within two months.