New Age practitioners often say things happen for a reason -- even if the reason isn't readily apparent.
Medical executives who had worked up a head of steam earlier this summer over the proposed merger of United HealthCare Corp., Minneapolis, and Louisville, Ky.-based Humana may now see the merit in that axiom. And perhaps, upon reflection, some health plan executives can too.
The planned $5.5 billion United-Humana stock swap would have created one of the nation's largest managed-care companies with more than 10.4 million enrollees and $27 billion in annual revenues. The insurance powerhouse that would have resulted in Illinois and Florida markets so worried some providers that they asked Justice Department officials to investigate the anti-competitive effects of such mega-mergers, particularly on the growing Medicare managed-care market.
In the end, Justice didn't need to send out its gumshoes, after all. The deal fell apart of its own weight.
After United posted a stunning second-quarter loss of $565 million, its stock price tanked, cutting the value of the deal to Humana shareholders by $2.9 billion. That, as they say, was all she wrote. Humana executives decided they would "disengage," saying they would be more successful on their own.
United long has been considered one of the better-run medical management companies, but the huge restructuring charges indicate trouble in several core business segments. Like a number of other managed-care companies, it is struggling to make money on its 35 Medicare HMO plans around the country.
In the end, failure to complete the deal may provide an unexpected opportunity for both United and Humana. Consumers are sending a message based on one of the past summer's most popular movie slogans: "Size matters." Mega-plans with impersonal customer service and growing restrictions on choice don't sit well with them.
Instead, it's time for health plans (as well as PPMs and gluttonous not-for-profit systems) to end their giant acquisition binges, concentrate on improving their operations and focus their growth.
Physician organizations also will face continuing pressure from managed-care companies to streamline and align their operations. In the short term, this may be a painful experience. But remember: Things happen for a reason. Those with lean and nimble organizations will be better positioned to succeed in the 1990s and beyond.