The merger of Health Systems International and Foundation Health Corp. has cleared its final regulatory hurdle with approval granted by the California department of corporations.
The deal closed April 1 in a stock swap in which Foundation became a subsidiary of HSI.
The new $7 billion company, renamed Foundation Health Systems, has 5 million enrollees in 17 states and ranks as one of the largest managed-care companies. Like the combination last month of PacifiCare Health Systems and FHP International, the merger can't become a full consolidation until the company submits detailed plans, as required by state law.
Until then, the HMOs can't make changes to their operations that affect quality assurance, utilization management, enrollee services and grievance processing, provider networks and contracts, and senior management. In addition, FHS must continue to cover enrollees' existing prescription drugs.
"The department will not approve final consolidation unless it is satisfied that enrollees will continue to receive access to quality medical care in a manner that assures continuity of care and that physicians will determine the patient's healthcare needs," said Keith Paul Bishop, who has been appointed but not yet confirmed as state corporations commissioner.
That didn't appease Jamie Court, director of Consumers for Quality Care, who said the group would call for Bishop's removal from office when he appears before the state Senate for confirmation later this month. The group, which backs state legislation curbing managed-care procedures, faults Bishop for allegedly ignoring the merger partners' "profiteering . . . corporate pasts."
Daniel Crowley, former Foundation chairman, president and chief executive officer, will serve as FHS' chairman for a year. He will then resign as chairman and remain a director.
Malik Hasan, M.D., president and CEO of FHS, will become chairman after Crowley's resignation.