Efforts to merge the for-profit operations of Philadelphia-based Independence Blue Cross and Graduate Health System are moving sluggishly ahead, officials at both companies said.
Although the proposal to join forces was announced early this year (Feb. 7, p. 8), the insurer and healthcare system have yet to sign an agreement.
If completed, the merger would create the area's first for-profit integrated healthcare delivery organization, according to Standard & Poor's Corp. The New York-based credit-rating agency recently published an analysis of Philadelphia's healthcare market in CreditWeek Municipal.
Harold Cramer, Graduate's chairman and chief executive officer, said the negotiations are moving at a crawl because "a lot of issues keep popping up," mainly differing valuations of the companies' assets by the respective investment banking firms. Shattuck Hammond Partners, New York, is representing Graduate; Legg Mason Wood Walker in Baltimore is Independence Blue Cross' investment banker.
In addition to merging for-profit operations, Graduate's not-for-profit operations will be incorporated into a new integrated delivery system.
Deciding whether to convert Graduate's hospitals to for-profit status also has delayed the process, said Rick Neeson, president and chief operating officer of QCC, Independence Blue Cross' for-profit holding company, which oversees the insurer's four managed-care plans.
Initially, such a conversion had been considered, Mr. Neeson said. Now, after weighing the economics of defeasing existing tax-exempt bonds, losing the benefits of tax exemption, and combining pension and benefit plans, officials have decided to keep the hospitals tax-exempt, he said.
This summer, Independence Blue Cross struck a deal to add 344-bed Presbyterian Medical Center to the integrated network being created (July 4, p. 14). Mr. Neeson said discussions with other Philadelphia-area hospitals and healthcare providers continue.