Advocate Health Care of Oak Brook, Ill., is looking for a new buyer for its managed-care plan after terminating negotiations last week with Healthsource of Hooksett, N.H.
Advocate, a system of eight hospitals in the Chicago area, had signed a letter of intent to sell Health Direct, a 25,000-enrollee HMO, for $27 million (April 22, p. 20). Advocate said it still plans to sell the HMO, which was pursued by other bidders before exclusive discussions began with Healthsource.
"We still do intend to pursue our strategic path to find a suitable purchaser for Health Direct, devoting our core strategy to being a provider network," said Dan Parker, an Advocate spokesman.
Executives said the decision to end negotiations was mutual.
"We regret we could not reach definitive terms with Advocate on the acquisition and related provider agreements, but with current industry conditions, transactions are more challenging to structure for all parties," Norman Payson, M.D., president and chief executive officer of Healthsource said in a written statement.
The decision of both parties also aborted a 10-year managed-care contract Advocate would have had with Healthsource, which has 50,000 enrollees in the Chicago area.
Health Direct, a for-profit subsidiary, was a 50-50 joint venture formed in 1980 between EHS Health Care and Lutheran General Health System, which merged last year to form Advocate.
Health Direct has $6.7 million in assets and had $29.3 million in revenues last year. It includes a PPO, a commercial HMO and a Medicare risk product.
Healthsource provides managed-care services to more than 3 million people primarily in the Midwest, Northeast and Southeast.