Blue Cross and Blue Shield of Missouri and BJC Health System in St. Louis said a trademark dispute has led them to nix plans to form an alliance or other business affiliation.
Last week's announcement made the week of March 10, 1997, one of the darkest chapters in provider-insurer business arrangements.
Also last week, the Ohio insurance department rejected the proposed acquisition of Blue Cross and Blue Shield of Ohio by Columbia/HCA Healthcare Corp. (See story on p. 2). In addition, Sierra Health Services called off its acquisition of Physician Corporation of America because of PCA's compounding financial woes, and Humana turned to a new corporate logo to pull itself out of trouble.
The Missouri announcement comes on the heels of the firings of the Blues' top two executives and a round of state and federal investigations into questionable real estate and stock transactions brokered by the plan.
A deal between BJC and the Blues plan would have linked the largest hospital system in eastern Missouri with the state's largest insurer.
BJC operates 13 hospitals and six nursing homes. The Blues plan covers nearly 2 million enrollees and owns 80% of RightChoice Managed Care. RightChoice is the publicly traded name of the Blues' for-profit subsidiary, Alliance Blue Cross and Blue Shield.
BJC and the Blues confirmed affiliation talks in January. At one point, the two considered the purchase by BJC of all RightChoice's Class A common stock for about $266.5 million. The exclusive talks were scheduled to continue until March 18.
Throughout the negotiations, the Blues continued to face problems. Earlier this month, it fired its chief executive officer, Roy R. Heimburger, and the president of Alliance, Frederic C. Brussee.
The executive changes followed reports of a federal investigation into whether the insurer's senior executives improperly benefited from the sale of the Blues' St. Louis headquarters and the purchase of other buildings in 1992 (March 10, p. 42).
The firings also followed a Missouri circuit court judge's decision in December 1996 that the Blues violated its not-for-profit status when it moved too much of its business into RightChoice (Nov. 25, 1996, p. 20).
But the Missouri Blues and BJC blamed a conflict over the Blues' rules governing the use of its trade name and service marks, not the legal issues, for the collapse of the talks.
"BJC has always been aware of the issues facing Blue Cross," said Stephanie Stemmler, a BJC spokeswoman. "They were on the table during the discussions. But the talks were terminated because we couldn't come to an agreement on the use of the logos."
Stemmler denied recent reports in the St. Louis Business Journal that BJC had put pressure on the Blues to clean house. "The reports are false, and we strongly deny that we had any part in the firing of those executives," she said. "The change in executives in no way enhanced or detracted from the actual negotiations."
Clara Kinner, a Blues spokeswoman, said the national Blue Cross and Blue Shield Association would no longer recognize the Missouri insurer as a Blues plan if it went ahead with its proposed integrated delivery system with BJC.
The association stripped the Ohio Blues of its national membership after the plan's proposed sale to Columbia, taking away the plan's use of the Blues name and trademark (Nov. 11, 1996, p. 8).
"The business combination we were most interested in didn't allow for the use of the Blue Cross name," Kinner said. She declined to elaborate on the business model the two systems wanted to pursue. She said the Missouri insurer decided the Blues brand name was too important for the plan to risk losing.
Both BJC and the Missouri Blues said they remain open to affiliation offers from other suitors.