As is the case in many scuttled healthcare mergers, a dispute over control spelled the end of the merger of Blue Cross of Northeastern Pennsylvania, based in Wilkes-Barre, and Capital Blue Cross, based in Harrisburg, Pa.
The pair made a public announcement of the breakup on Aug. 15 but provided few details as to why the relationship failed (Aug. 18, p. 4).
In a joint statement, the companies said their proposed merger had foundered over their failure to agree on certain unspecified terms. The plans had hoped to complete their merger by Jan. 1, 1998. Together, they insure more than 2 million people in Pennsylvania, and both are already highly profitable.
"We could not agree on how to structure the organization," said Heidi Irwin, a Capital Blue Cross spokeswoman. "Basically, the devil was in the details."
Blue Cross of Northeastern Pennsylvania spokesman Gerry Guarilia went a bit further. Talks broke down over how the combined plans would be governed, including the composition of the board of directors and voting issues, he said. Where administrative employees would be located also proved to be a stumbling block, he explained.
The plans signed a letter of intent to merge in 1996, and the boards of both plans approved the deal in May.
With 975 employees and 620,000 covered lives, Blue Cross of Northeastern Pennsylvania earned $19 million on revenues of $582 million last year. Capital Blue Cross has 2,000 employees and more than 1.4 million covered lives in 21 counties. It earned $35 million on $1 billion in revenues in 1996.
Neither side ruled out the possibility that discussions could be resumed in the future. Both companies, however, indicated they had determined it was in their best interests to separately pursue other options for now.
"We are evaluating the other strategic alternatives and alliances we have before us," Capital Blue Cross' Irwin said. As for Blue Cross of Northeastern Pennsylvania, Guarilia said, "The door is not completely closed" to talking again with Capital. The boards, he explained, said, "let's just stop it for right now."
In the meantime, both plans said they will continue to participate in several existing joint ventures.