FOUNDATION HEALTH: Sells Money-Losing Subsidiaries
Los Angeles-based Foundation Health Systems Inc. announced yesterday that it has entered into a definitive agreement to sell its health plan subsidiaries in Louisiana, Oklahoma and Texas to Houston-based AmCareco Inc., a health care and employee benefits company. While exact terms were not released, FHS will receive as part of the transaction a preferred equity position in AmCareco. FHS CEO Jay Gellert said, "We are very pleased that these plans are going to AmCareco and [its] excellent leadership. ... While these three states did not fit out core strategy, AmCareco will continue to provide outstanding service to these members in the months and years ahead" (FHS release, 11/5). The sale will affect 65,000 of FHS's 4.4 million members. Bloomberg News/Los Angeles Times also reports that FHS's "plan to sell its money-losing workers' compensation unit for $285 million cleared a major hurdle as buyer Superior National Insurance Group Inc." received $125 million in financing from Chase Manhattan Bank. The two sales are part of Gellert's strategy "to shed unprofitable businesses as the company struggles to cope with medical costs that are rising faster than forecast." Volpe Brown Whelan analyst Ed Keaney said, "There's plenty of work to do in their main area. They need to focus their attention there. ... It's a step in the right direction -- a teeny, little baby step." He noted that he has a "neutral" recommendation on FHS shares (11/6). Click here for coverage of Foundation's third-quarter earnings report.
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