As part of its continuing effort to get back to the basics of operating hospitals, HCA-The Healthcare Co. is selling a managed-care subsidiary that it bought in 1997.
HCA, the nation's largest hospital chain, signed a definitive agreement to sell CCN, a national group health and workers' compensation managed-care business, to First Health Group Corp., based in Downers Grove, Ill., for $195 million, the companies said last week. The deal is expected to close in July.
San Diego-based CCN was one of four business lines operated by Avon, Conn.-based Value Health, which HCA bought in 1997. The other business lines-a behavioral health network, a pharmacy benefit management company and a medical software company-already have been divested; the pharmacy benefit business was the last to be sold
HCA was deep into its negotiations to buy Value Health when a federal fraud investigation into its business practices became public in early 1997. Thomas Frist Jr., M.D., who took the reins as HCA's chairman and chief executive officer shortly thereafter, completed the acquisition but immediately began plans to divest the new businesses.
Frist's predecessor, Richard Scott, sought to branch out into lines of business not directly related to patient care, but Frist wanted to focus on hospital ownership. HCA has been able to operate CCN profitably, however, combining it with some other smaller preferred provider networks it already operated and even benefiting from the expertise it brought to HCA's overall managed-care strategy, said HCA spokesman Jeffrey Prescott.
"We kept CCN until we could figure out exactly what it was all about," Prescott said. "Obviously it's not a core business for us."
CCN, historically a preferred provider organization network, will bring a new market niche to First Health's corporate benefits management emphasis, said Lee Dickerson, executive vice president of provider networks and workers' compensation services at First Health. Under the sale agreement, all of HCA's hospitals, surgery centers and employed physicians will be added to First Health's national network for two and a half years, he said.
CCN, which originally stood for Community Care Network, will retain its name and brand identity under the new ownership, Dickerson said.
The company's name has in the past been a source of some controversy. In 1993, before Value Health bought CCN, the Community Health Alliance, which then operated it, settled a $40 million trademark infringement suit it had filed against the American Hospital Association because the AHA had adopted the phrase "community-care network" to describe part of its national healthcare reform plan. As part of the settlement, the AHA had to include a disclaimer every time it used the term. Since it has been part of HCA, the network has gone by the acronym CCN.