Proposed mergers involving four large health plans illustrate the differences between state and federal regulators.
Although the Federal Trade Commission gave antitrust clearance to the $2.1 billion acquisition of FHP International by PacifiCare Health Systems without comment, the California Department of Corporations held two days of hearings on the deal in Irvine and San Diego last week.
Plan executives were grilled by state regulators on topics such as the plans' concentration of Medicare risk contracts in Southern California. Members of the public criticized PacifiCare and FHP on patient-care issues and executive compensation.
In Florida, the state's Agency for Health Care Administration appears adamantly opposed to granting Sierra Health Services of Las Vegas a state Medicaid contract.
Under Florida law, the denial must be made because of the 1991 misdemeanor conviction of Sierra's chief executive officer, Anthony Marlon, in connection with a bid the company made for a Nevada Medicaid contract.
The rejection could ultimately scuttle Sierra's $450 million acquisition of Miami-based Physician Corporation of America-another deal that received antitrust approval from the FTC.
Industry observers say scrutiny on the state level is more aggressive because regulators tend to be more attuned to the needs of their constituents and are looking to boost their political careers.
The California hearings on the PacifiCare deal were announced just days after the same state agency levied $500,000 in fines against 43 insurers, including 12 HMOs, for misconduct (See story, below).
"There's a growing consumer backlash that is clearly registering with politicians and elected representatives," said Peter Boland, president of Boland Healthcare, a Berkeley, Calif.-based consulting firm. "What you'll see now is perhaps an overreaction, a thought that regulators were caught napping, and that the managed-care horses were let out of the barn."
California Department of Corporations Commissioner Keith P. Bishop remarked at the Irvine hearings last week that "our perspective is different than antitrust" and it would focus more on consumer issues.
The hearings elicited testimony from more than 30 speakers. Many organized groups, such as Consumers Union and Consumers for Quality Care, urged the deparment to delay or scrap the deal because they said it would give the companies a monopoly over Medicare risk contracting in Southern California.