Kaiser Permanente last week reached a definitive agreement to sell its Southwest division to HMO Texas, an affiliate of Las Vegas-based Sierra Health Services, for $129 million.
That price could jump by another $30 million over the next three years if various enrollee-retention and accreditation goals are met, according to the two companies, which announced a tentative sales agreement late last month (June 1, p. 4).
The Southwest unit lost $50 million last year and landed the national health plan in a nasty 1997 dispute with Texas Attorney General Dan Morales.
The sale includes Kaiser's 123,000-enrollee health plan in Texas and a 150-physician medical group in the Dallas-Fort Worth area. Initially, Sierra Health will pay $71.5 million for the health plan, $7.5 million for the medical group and $70 million for the book value of their hard assets.
After the sale is complete, Kaiser will pay Sierra $20 million in operating cost support in five quarterly installments.
The transaction is expected to close by the end of October, subject to regulatory approvals.
Both boards and the Permanente Medical Association of Texas medical group have approved the sale.