Montana is getting a taste of what has been occurring throughout the rest of the nation: a merger of the state's two largest managed-care plans.
The proposed merger of Blue Cross and Blue Shield of Montana and Yellowstone Community Health Plan, which is owned by Saint Vincent Hospital and Health Center in Billings, would create a consolidated payer with 36,000 managed-care enrollees in HMO and point-of-service plans.
The deal requires the approval of the Montana insurance commissioner. A ruling is expected by early November, said Claudia Griffiths, the commissioner's healthcare adviser. The closing is expected by the end of the year.
The deal, in the works for the past six months, is being forged for the same reason that payers have gotten together elsewhere: geographic penetration.
Yellowstone, with about 10,500 commercial and Medicare risk enrollees, has been confined mostly to the greater Billings area in southeastern Montana.
"In one instance we lost a 600-employee group because we couldn't give them providers outside of our immediate service area," said Yellowstone Chief Executive Officer Mark Burzynski. "We also needed the flexibility to offer more products, and without Blue Cross/Blue Shield we would not have had the financial wherewithal to do so."
The Blues plan has the deep pockets Yellowstone lacks. Its managed-care subsidiary earned $1 million on revenues of $30.2 million last year, according to filings with the Montana state auditor. By contrast, Yellowstone had a meager profit of $191,000 on revenues of $10.3 million in 1997.
The Blues plan has provider networks in Helena, Great Falls and Missoula. It has 10,000 point-of-service enrollees and another 16,000 HMO enrollees.
Although the Blues plan has another 245,000 indemnity enrollees statewide, the deal with Yellowstone would give it the reach into eastern Montana that it lacks.
"We'll now be able to serve companies based in one region whose employees are based statewide," said Charles Butler, the Blues vice president in charge of government and public relations.
Under terms of the deal, the Blues would acquire a 50% stake in Yellowstone for about $3 million, with the purchase handled through a for-profit subsidiary created by Yellowstone, a not-for-profit.
Montana law prohibits not-for-profit companies from acquiring one another.
Yellowstone would retain its name but operate as a for-profit subsidiary of both the Blues plan and 257-bed Saint Vincent. The plan would be governed by a 13-member board, with both sides picking six directors. Burzynski would hold the remaining seat as acting CEO of the organization.