Health Alliance Plan and PPOM, a for-profit subsidiary of Blue Cross and Blue Shield of Michigan, last week completed their acquisition of SelectCare, one of the largest hospital-owned health plans in southeast Michigan, for $80 million.
The sale gives Detroit-based HAP, one of the state's most profitable managed-care companies, control over 45% of commercial HMO membership in the Detroit area and gives Southfield-based PPOM a dominant share of the local PPO market.
Under the agreement, HAP purchased Troy-based SelectCare's 120,000 HMO members, while PPOM bought SelectCare's PPO and point-of-service memberships, which total about 206,000.
The announcement came just days after the U.S. Justice Department cleared the last regulatory hurdle to the sale by finding that dividing and selling SelectCare did not violate antitrust laws.
The deal received approval from Michigan's insurance department in November 2000, and the companies had hoped to receive federal clearance shortly after that. The longer-than-expected review by the Justice Department had fueled speculation throughout the state that the purchase would not be completed until much later this year.
William Beaumont Hospitals, Oakwood Healthcare, Providence Hospital and St. John Health System, four not-for-profit hospital systems serving southeast Michigan, formed for-profit SelectCare in 1984. A small portion of SelectCare was owned by physicians until 1996, when the firm was restructured. At that time, the hospital system owners bought out most of the physician shareholders.
Although annual revenue for SelectCare's HMO increased to $243.1 million in 1999 from $187.8 million in 1998, its net income has fluctuated over the years. Its HMO product earned $2.4 million in 1999, down from $5.3 million the year before. SelectCare turned a modest profit in 2000, though specific earnings and revenue figures have not yet been released, a company spokeswoman said. In 1999, SelectCare's parents, like many large hospital systems, decided to exit the health-plan business and began looking for a buyer.
For HAP, the acquisition promises a much greater presence in affluent Oakland County, where it traditionally has had trouble penetrating the market for lack of a wide physician network, analysts said. Combined, HAP and SelectCare will have about 612,000 HMO members, compared with Blue Care Network of Michigan, which has 604,000 members.