A review of its physician contracts is on the agenda for United HealthCare Corp., after financial difficulties torpedoed its planned merger with Humana.
Minneapolis-based United says it plans to review its provider contracts as a way to reduce costs and likely will abandon certain Medicare markets.
Physicians in both Florida and Illinois opposed the deal and asked Justice Department officials to investigate the anti-competitive effects of the planned $5.5 billion merger (see August, page 4). The deal would have created a super managed-care company with more than 10.4 million enrollees, $27 billion in annual revenues and a stranglehold on certain Medicare HMO markets.
The two companies agreed to call off the union last month after United reported a second-quarter loss of $565 million. The decision eased provider concerns about the creation of a managed-care monopoly.
United's second-quarter results surprised many -- including Humana -- and its stock plummeted 28% the day it announced the loss.
"I can assure you that the extent of United's problems came as a surprise to us," says Humana spokesman Greg Donaldson. "Dissolving the merger agreement is clearly in our best interest."
Much of United's second-quarter loss was attributed to an anticipated $900 million in realignment charges. Those charges include severance pay for planned layoffs and the consolidation of information systems. United plans to consolidate operational activities to reduce related costs, says spokeswoman Susan Busch.
"We may withdraw from some markets, reduce our Medicare HMOs, and we may re-evaluate provider contracts as a way to reduce expenses," Busch says.