FOUNDATION HEALTH: DISCUSSES MERGER WITH HEALTH SYSTEMS
Foundation Health Corp. and Health Systems InternationalThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
Inc. are currently in merger talks "that would create a managed
care powerhouse with more than 2.5 million members in California
alone," according to industry sources (Olmos, LOS ANGELES TIMES,
9/17). In a statement released yesterday, Foundation Health said
that it "has been in 'preliminary discussions concerning a
strategic combination with a third party," although it would not
disclose the name of the party. The Rancho Cordova, CA-based HMO
stressed that there is no guarantee that the "discussions will
lead to a definitive agreement," but said that "any agreement
would be a stock transaction on a 'merger-of-equals basis'"
(Rundle, WALL STREET JOURNAL, 9/17).
KEEPING UP WITH THE JONESES: Industry analysts said that
the merger talks between Foundation Health and Woodland Hills,
CA-based Health Systems International "are at least partially a
response to" an announcement last month by PacifiCare Health
Systems that it will buy rival FHP International for $2.1 billion
(TIMES, 9/17). Sanford Bernstein & Co. analyst Kenneth
Abramowitz said, "Everyone wants to get bigger, and get bigger
fast." He added that "[c]ompetition is particularly intense in
California, where the managed care market is more mature and
costs are low." He added that the recent buyout of FHP by
PacifiCare "is just the latest reason for their competitors 'to
be more bold and creative'" (JOURNAL, 9/17).
BIG DEAL: BLOOMBERG BUSINESS NEWS/INVESTOR'S BUSINESS DAILY
reports that Foundation Health currently has about 1.5 million
members, including 102,000 Medicaid recipients added during the
second quarter this year. In addition, Foundation Health was
recently awarded a contract to serve 640,000 military dependents
in California under the Champus program. Piper Jaffray analyst
John Penshorn said that the deal would put Foundation Health
"right behind" Kaiser Permanente, PacifiCare-FHP, and possibly
HealthNet, a unit of Health Systems (9/17). Health Systems
currently has 1.9 million members and $2.7 billion in revenues
(TIMES, 9/17). JOURNAL reports that the two companies would have
more than $6 billion in combined revenues (9/17).