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Behind 5 Major Health Plan Acquisitions

Margaret Dick Tocknell, for HealthLeaders Media, November 28, 2011

Sure, a successful Highmark-WPAHS combination could challenge the dominance of UPMC in the Pittsburgh-area market but WPAHS was teetering on closure when Highmark saved the day. The health system could be a money pit for the successful Blues plan, which will invest at least $475 million in the five-hospital system. But it could still be a sweet deal given that UPMC wanted an additional $400 million in annual reimbursements.

If you set aside all of the Highmark-UPMC finger pointing and the he-said-she-said drama, the Highmark-WPAHS deal represents another step in the realignment of the healthcare business. Owning a health system makes Highmark the ultimate insider in assessing the cost drivers of the healthcare delivery system. It puts the insurer in the driver's seat in terms of implementing quality and cost control programs across a large, vertically integrated system.

PWC's Elek sees possibilities for similar acquisitions in other regions of the country. This acquisition could serve as a model for other regional insurers to play a bigger role in the delivery of care to their members to make sure they receive the highest quality of care in the most appropriate setting.

It's still much too early to determine how this acquisition will play out. Highmark is moving forward with its commitment to West Penn to upgrade several facilities, including upgrading some trauma centers to allow for the treatment of more complex cases. Meanwhile, UPMC and Highmark remain at loggerheads and Gov. Tom Corbett is threatening state intervention to resolve the contract dispute.

3. WellPoint and CareMore Health Group

During a February conference call with investors, WellPoint CEO Angela Braly acknowledged that the giant insurer was struggling in the Medicare Advantage market. With around 500,000 MA members Braly said the company would probably make an acquisition to grow that market segment. "We haven't captured the market share that we could there."

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