Magellan Health Services is exploring opportunities to diversify its behavioral healthcare business into other types of specialty services.
Spokesman Joel Weiden said Magellan is considering extending its behavioral healthcare outcomes management tools, monitoring systems and treatment protocols to other clinical areas, such as oncology, diabetes and cardiology.
Weiden said the company has no specific acquisitions to announce but plans to branch out within the next year. "It's a natural extension of the company's current business," he said.
The push to diversify comes in the wake of two deals designed to position Atlanta-based Magellan as one of the nation's largest managers of behavioral healthcare services. The company primarily used to operate psychiatric hospitals under the name Charter Medical Corp.
Last week, Magellan announced it has agreed to buy Park Ridge, N.J.-based Merit Behavioral Care Corp. for $460 million in cash and the assumption of some $295 million in debt. The transaction is expected to be completed by year-end.
"While this transaction is clearly based on creating a platform for growth, we also expect there will be significant efficiencies realized over the next three years through the integration of Merit and our other managed-care operations," said E. Mac Crawford, chairman, president and chief executive officer of Magellan.
Magellan also announced it expects to complete its previously announced $122 million acquisition of Human Affairs International, another managed behavioral healthcare company, from Blue Bell, Pa.-based Aetna U.S. Healthcare by year-end.
The three companies will have combined annual revenues of $1.5 billion and provide behavioral healthcare case management services to about 60 million covered lives.
In the Merit deal, Magellan said it will refinance Merit's $100 million in senior subordinated notes and an additional $195 million in debt. Magellan said it also will refinance $375 million of its own senior subordinated notes and $170 million in remaining debt to take advantage of more favorable interest rates.
Magellan said New York-based Chase Securities has agreed to provide the $1.3 billion in financing needed to complete the Merit acquisition and related refinancings.
Magellan manages behavioral healthcare services for 20 million people through 50,000 contracts between employers or insurers and its Columbia, Md.-based Green Spring Health Services subsidiary. Magellan also owns a 50% stake in Charter Behavioral Health Systems, the nation's largest operator of freestanding behavioral healthcare facilities.
Merit is controlled by Kohlberg Kravis Roberts, a New York-based investment firm, and provides mental health, substance-abuse treatment and employee assistance programs for more than 21 million people.