NASHVILLE -- Phoenix Healthcare Corp. and Health Net TNCare HMO completed their merger last month, but only after private investors ponied up cash to complete the deal.
Samuel Howard, chairman of the new company -- Phoenix Healthcare of Tennessee -- declined to name the investors, but he said they contributed $6 million to $7 million. He also added that the investors were individuals, not companies. The new company is based in Nashville.
The merger, announced last July, created the third-largest Medicaid managed-care organization in Tennessee with more than 160,000 enrollees.
Phoenix Healthcare is a managed-care company created by Howard in 1994. It focuses on enrolling Medicaid recipients. Health Net TNCare is a subsidiary of Health Net Management, which was created by Baptist Hospital in Nashville in 1984. Saint Thomas Health Services, also of Nashville, and Santa Barbara, Calif.-based Tenet Healthcare Corp. have minority stakes in Health Net Management.
Howard turned to private investors to complete the merger because Charlotte, N.C.-based NationsBank wasn't going to lend his company the needed funds in time. NationsBank, with which Phoenix Healthcare had a $22.5 million line of credit, wouldn't make the money available until early this year.
Investors rallied on short notice because "they believed in the company -- and they know our track record," Howard said.
Health Net Management agreed to the deal after it decided to get out of the Medicaid business and concentrate on its Medicare and other commercial healthcare businesses, said Cynthia Howard, senior vice president for sales and marketing.
"We believe we can focus our efforts on our core business," she said, adding that Health Net still insures 267,500 enrollees through its other insurance products.
Through the third quarter of last year, Phoenix lost nearly $4.6 million while Health Net TNCare lost nearly $15 million.