ANTITRUST: FTC SCRUTINIZES PACIFICARE’S PLAN TO BUY FHP
The FTC is "raising serious antitrust questions" aboutThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
PacifiCare Health Systems Inc.'s pending acquisition of FHP
International, WALL STREET JOURNAL reports. The review of the $2
billion deal focuses on "how the combined giant could dominate
the Medicare HMO business." JOURNAL reports that "[a]ntitrust
enforcers are especially concerned about the market clout
PacifiCare-FHP could wield in Southern California," adding that
"the close scrutiny increases chances that the agency may seek
changes to the transaction to remedy potential anticompetitive
effects."
CONSUMER RESPONSE: Consumers Union sent a letter yesterday
to the FTC, urging it to "take an especially hard look at the
combination's potential effect in California." JOURNAL notes
that the "consumer group expressed concern that the deal could
lead to higher prices and poorer quality of health services for
the state's Medicare enrollees." The letter said, "As
PacifiCare-FHP corner(s) more of the market, it can save money
and increase profits by limiting the amount of services available
to consumers without the fear of competition from other
providers."
MORE: JOURNAL reports that a "detailed review is likely" in
light of issues raised since the transaction's initial
announcement in August (see AHL 8/6). JOURNAL reports that FTC
officials will attempt to determine if Medicare HMO participants
"would be willing to switch back to conventional Medicare if
prices rose" as a result of the deal. "If that doesn't seem
likely" the combination could be "deemed anticompetitive, because
such a finding would suggest that conventional Medicare isn't a
true competitor with HMOs." An FHP spokesperson said the
antitrust inquiry was "routine." PacifiCare expects to complete
the transaction by mid-January, according to a company
spokesperson.
OF GIANT PROPORTIONS: The proposed buyout would create an
HMO "giant" with four million members in 15 states and Guam,
JOURNAL reports. The company would have 960,000 Medicare
enrollees nationwide and a 46% proliferation of California's HMO
Medicare market, making it "by far the biggest player in the
surging" industry. JOURNAL reports that by "some estimates," the
Orange County-based combination would "cover nearly two-thirds of
Medicare HMO participants in Orange County" (Gruley/Rundle,
10/10).