As PacifiCare Health Systems moved last week to revamp operations in the Pacific Northwest, its pending $2.1 billion acquisition of FHP International is receiving close scrutiny from federal regulators and consumer groups.
The Wall Street Journal reported last week that the Federal Trade Commission has raised concerns about antitrust implications in the Medicare managed-care market once the FHP deal is completed.
The merger of FHP's operations into PacifiCare would create an HMO with 4 million members in 15 states and U.S. territories. It would also have nearly 1 million Medicare enrollees, making it the country's largest player in that segment of managed care. Its Medicare market share in California would approach 50%. PacifiCare is based in Cypress, Calif., and FHP is headquartered in Fountain Valley, Calif.
The FTC has asked PacifiCare and several competing HMOs operating in California for additional information regarding the implications of the deal on the Medicare managed-care market, according to PacifiCare spokeswoman Susan Whyte Simon. The information is being compiled, and company officials still expect the deal to be completed by January, she said.
Meanwhile, Santa Monica, Calif.-based Consumers for Quality Care has asked the state Department of Corporations, which monitors HMOs in California, to block the deal unless FHP pays a $500,000 fine levied against TakeCare Health Plans in November 1994. FHP had acquired Concord, Calif.-based TakeCare five months earlier.
The fine, levied in connection with TakeCare's denial of a non-network surgical referral for a 9-year-old kidney cancer patient, is the only one the DOC has ever levied against an HMO. The fine is being appealed.
Consumers for Quality Care, founded by insurance industry activist Harvey Rosenfeld, is the co-sponsor of Proposition 216, a ballot initiative that would place curbs on the HMO industry if passed by voters next month.
In its revamp, Mary O. McWilliams, PacifiCare's Northwest regional vice president, and Maureen McLaughlin, general manager of PacifiCare of Washington, will both leave the company on Nov. 1. McWilliams oversaw PacifiCare's operations in Washington and Oregon.
Brad Bowlus, currently chief executive officer of California Dental Health Plan, PacifiCare's dental subsidiary, has been named CEO and president of PacifiCare of Washington, effective Oct. 21.