Texas Health Resources is getting out of the HMO business by the skin of its teeth.
When the 14-hospital, Irving-based system sells the plan to Chicago-based Health Care Service Corp., the parent of Blue Cross and Blue Shield plans of Texas and Illinois, it will barely recoup the money its HMO cost last year.
THR itself is in the process of merging with Baylor Health Care System, Dallas, in a deal expected to close by August.
HCSC will pay $99.5 million in cash to acquire Harris Methodist Health Plan, Arlington, Texas, according to a purchase agreement filed with the Texas Department of Insurance last week. That price is just $400,000 more than the 308,000-enrollee HMO reported in losses last year on revenues of $586.6 million (March 15, p. 17).
John Gavras, president of the Dallas/Fort Worth Hospital Council, said Harris Methodist has dominated the HMO market in Fort Worth, where the Blues has barely a foothold. But THR has maintained its dominant position at a huge financial cost, and Gavras greeted its exit from the HMO business with some relief.
"I've never been a proponent that you can be a provider and purchaser at the same time," he said.
No figures are available for the HMO's financial performance in this year's first quarter.
After the purchase is completed, HCSC will try to stem the HMO's losses by cutting jobs, integrating operations and expanding coverage in northeast Texas, according to documents filed with the state.
Officials from both companies declined comment on the purchase agreement, but the state attorney general's charitable trust division said the sale price reflects a fair value.
Lisa McGiffert, a lawyer for the Texas Southwest Region Consumers Union, a consumer advocacy group, expressed concern that the not-for-profit parent company might be settling for too low a price. q
Texas insurance and health departments must approve the sale, but declined to say how long that process would take.