Two competing for-profit provider-owned PPOs are merging, with the hope of building a provider network to rival the big insurance players in the Great Plains.
As of Jan. 1, 2001, Midwest Select, a 140,000-enrollee plan owned by three hospital groups, will become part of Midlands Choice, a 530,000-enrollee plan owned by a hospital system and five physician-hospital groups.
The combined company, which projects revenue of up to $13 million in 2001, will use the name Midlands Choice and be based, as the two PPOs are now, in Omaha, Neb., said Ralph Morocco Jr., who will continue as president and chief executive officer of Midlands Choice.
As a combined company, the PPOs would have turned a profit in 1999, Morocco said; Midwest Select suffered a loss last year, but Midlands Choice earned a profit. Morocco declined to disclose the profit and loss figures.
The combined PPO will contract with about 260 hospitals and 10,000 doctors across Iowa, Nebraska and most of South Dakota, Morocco said. The combined network has contracts with 42 insurance carriers and 100 third-party administrators.
Both PPOs served roughly the same areas, but combining them gives customers the broader choices they have been demanding, Morocco said. He expects to save money by using Midlands Choice's systems and workers on claims repricing and other management services that Midwest Select had outsourced.
The beefed-up Midlands Choice will provide smaller insurers and self-insured companies with a big network outside of those run by large insurers, said Steven Brenton, president of the Iowa Hospital Association.
Two of the biggest PPOs in Iowa and Nebraska are run by the insurance companies Wellmark, the Blue Cross and Blue Shield license-holder in Iowa and South Dakota, and Mutual of Omaha Insurance Cos. in Nebraska.
"I think what you will have with this merger is a full provider network that has the ability to compete with Wellmark in many areas of the state," Brenton said.
Brenton said he also likes that both PPOs are owned by hospitals and physician groups, especially since Iowa providers have tangled with Wellmark over its refusal to directly pay providers outside of its network.
The Nebraska Association of Hospitals and Health Systems in Lincoln also sees the merger as improving choices for patients, because patients in some towns will have a wider range of hospitals and physician practices within their network.
Midlands Choice's parent, Midland Health Partners, is owned by an Iowa hospital system, Bryan LGH Health System, and five physician-hospital organizations, three in Iowa and two in Nebraska.
Midwest Select is owned by three hospital groups: Omaha-based Alegent Health, with seven hospitals in Iowa and Nebraska; an Iowa subsidiary of Denver-based Catholic Health Initiatives; and Des Moines, Iowa-based Mercy Health Network.
Midwest Select's partners traded their interest in Midwest and cash for a one-third stake in the new Midlands Choice, said Morocco, who would not disclose the amount of the cash contributions.
To its 130 employees, Midlands Choice will add Midwest Select's 10 workers. Midwest's CEO, Linda Sufficool, will serve as a consultant with a six-month, renewable contract, Morocco said. Though the networks will be combined beginning in the new year, Midwest Select patients won't see new cards until their next regular re-enrollment period. The transition should be complete in 12 to 18 months, Morocco said.