Blue Cross and Blue Shield of Kansas City (Mo.) is moving closer to spinning off its managed-care operations in a public stock offering.
Although the insurer hasn't decided whether to go ahead with the initial public offering, "we're seriously leaning in that direction," spokesman Leigh Elmore said. The decision could depend in part on market conditions later this year.
"It's a process-driven thing. You have to jump through a lot of windows on the way to making a `go' or `no-go' decision," Elmore said.
In the meantime, the Kansas City Blues is starting to organize its affairs to make a future transition happen smoothly. It has filed papers with the Missouri Insurance Department seeking permission to move two managed-care organizations into another subsidiary called Integrated Health Systems. The two managed-care plans, Blue Care and BMA SelectCare, are now directly owned by the Blues.
The filing is not directly related to the potential IPO, but "we're trying to get all our managed-care operations in one basket," Elmore said.
Last year Blue Cross and Blue Shield of Missouri, based in St. Louis, spun off its collected managed-care operations into RightChoice through an IPO.
The Kansas City Blues wants to transform itself into an integrated healthcare delivery system and compete on a more even footing with the big national companies active in its market.
"To carry out this strategy we need an infusion of capital," Elmore said. "You can borrow it, you can raise rates, or you can approach capital markets. We've determined the first two are not viable."
The Kansas City Blues has $150 million in reserves. In the year ended Dec. 31, 1994, the Blues had net income of $24.2 million on revenues of $487.6 million. The previous year, it reported net income of $19.6 million on revenues of $472.4 million.
Randy McConnell, spokesman for Missouri Insurance Director Jay Angoff, said the department is studying the tax and competitiveness issues implicit in a stock sale. "We're looking at what some other people have done around the country," he said.
According to the Chicago-based national Blue Cross and Blue Shield Association, so far there are four publicly traded Blues subsidiaries: RightChoice; United Wisconsin Services, a subsidiary of Blue Cross and Blue Shield of Wisconsin; Acordia, a health-insurance brokerage subsidiary of Blue Cross and Blue Shield of Indiana; and WellPoint Health Networks.
Blue Cross of California spun off its managed-care business into WellPoint in January 1993. After regulators and consumer groups objected to the for-profit conversion, Blue Cross agreed to donate $2 billion to create a charitable foundation.