The sales of two of the largest provider-owned health plans in Texas were completed last week, consolidating the state's HMO market in the hands of national managed-care payers.
Both plans had generated millions of dollars in losses for their hospital system owners.
In the Dallas-Fort Worth area, Texas Health Resources transferred its Harris Methodist Health Plan, a 300,000-member HMO and PPO, to PacifiCare of Texas for approximately $117.5 million, according to the Texas insurance department.
Meanwhile, Memorial Hermann Healthcare System in Houston and Christus Health in Irving, Texas, closed on the sale of their 131,000-member plan, Memorial Sisters of Charity Health Network, to Humana. The purchase price for the plan, which serves the Houston and Corpus Christi markets with PPO and HMO products, was $62 million, according to state records.
Both deals were completed after garnering state approval last week.
At year-end 1998 Harris Methodist had an 8.6% market share in the state and was the third-largest HMO there, after NYLCare and Prudential HealthCare, according to the insurance department. Memorial Sisters of Charity was No. 12, with 2.5% of the state's HMO enrollees.
Since then the managed-care landscape has changed as national companies strengthened their grip. The four largest HMOs in Texas have 68% of the market compared with 49% in mid-1998, according to Allan Baumgarten, the Minneapolis-based publisher of an annual report called Texas Managed Care Review.
Last year, Aetna U.S. Healthcare consolidated about 860,000 members, or 22.8% of the HMO enrollment in Texas, by merging with Prudential and acquiring NYLCare's Medicare business, Baumgarten said. Blue Cross and Blue Shield of Texas acquired NYLCare's commercial enrollees, consolidating 725,000 HMO enrollees, or 19.2% of the state's HMO enrollment. PacifiCare and Humana round out the top four.
Both of the provider-owned plans reported losses for the past two years.
Harris Methodist lost $32.1 million on revenue of $174 million in the third quarter of 1999, according to the state insurance department. For the first three quarters of the year, the plan lost $49.1 million on revenue of $509 million. The plan lost $99.1 million on revenue of $592.7 million in 1998.
Memorial Sisters of Charity lost $156,630 on revenue of $68 million in the third quarter of 1999. For the first three quarters of 1999, it lost $895,746 on revenue of $193.7 million. It lost $10.6 million on revenue of $165.2 million the previous year.