Sides debate merits of buyout
Consumers, doctors and community activists lined up at a public hearing Thursday to take sides in UnitedHealth Group’s purchase of Sierra Health Services.
Among those praising the deal was Somer Hollingsworth, chief executive officer and president of the Nevada Development Authority.
The authority’s employees are insured through Sierra Health, and Hollingsworth said UnitedHealth’s acquisition of Sierra Health would give his workers a national network of health-care providers. That’s important for an agency whose staffers frequently travel out of state on recruiting trips, he said.
The presence of UnitedHealth, a Fortune 50 company with more than 70 million customers nationwide, could also give Nevada a higher health-care profile and lure other major competitors to the state’s markets, Hollingsworth said.
Julie Murray, chief executive officer of Three Square, said her anti-hunger charity and other local nonprofits would benefit from the additional philanthropic largesse UnitedHealth could bring to the state. Sierra Health is a "good corporate citizen," she said, and UnitedHealth would bolster the company’s charitable resources.
And benefits consultant Georges Maalouf said UnitedHealth’s acquisition would give Sierra Health’s policyholders access to more product lines and to bigger doctor networks outside Nevada.
Some local doctors are less enthusiastic about the purchase.
Sierra Health insures about 670,000 in Las Vegas, while UnitedHealth insures roughly 138,000.
The combination of the two would create a monopoly that could discourage physicians from pushing for extra patient care out of fear that the larger company could exclude them from provider networks, said Dr. John Nowins, immediate past president of the Clark County OB/GYN Society.
The company could also slash reimbursements to doctors, leaving them with less cash to invest in advanced equipment, he said.
Gynecologist Rhonda Robbins said a UnitedHealth monopoly would lead to higher numbers of uninsured patients, as the lack of competition reduced incentives to pursue new clients. The insurance shortage could be especially acute among businesses with fewer than 50 employees, she said.
Retired nurse and cancer patient Shelli Miller also wasn’t convinced of the sale’s merits.
Miller was insured through PacifiCare’s Secure Horizons and fighting breast cancer when UnitedHealth bought out Pacificare in 2005. What followed, Miller said, were big gains in her out-of-pocket expenses. Miller’s $1,500 deductible was replaced with a policy that required her to shell out 20 percent on all her procedures, including chemotherapy. Miller switched over to Sierra Health in February, and she said her expenses have dropped as a result. Now, she’s concerned UnitedHealth’s purchase of Sierra Health will raise her out-of-pocket costs again.
"(UnitedHealth) kept saying our (PacifiCare) benefits would be enhanced, and lo and behold, everything was cut," Miller said in an interview before she made her public comments. "It was a full-time job dealing with all the aggravation and trying to gain access to the system."
Executives of UnitedHealth and Sierra Health spent two hours Thursday defending their $2.6 billion deal.
UnitedHealth wants a big presence in one of the country’s fastest-growing markets and a toehold in Sierra Health’s business model, which centers on primary care through physicians at Sierra’s Southwest Medical Associates.
Sierra Health is seeking access to UnitedHealth’s national provider network and to the economies of scale that come with major operations.
Both sides deployed witnesses to testify that the combined company would have difficulty asserting monopoly power in Nevada.
Sean May, an antitrust expert with the Boston consulting firm of CRA International, said his study of the Nevada health-care market showed that the two companies together were responsible for just 15 percent of hospital revenue and 17 percent of physician reimbursements statewide. May also noted the state has more than 20 carriers competing for Medicare Part D business.
John Grady, owner of John Grady Insurance in Las Vegas, said several major insurers, including Humana, WellPoint and Aetna, are boosting their presence in Southern Nevada, opening new local offices and adding management teams.
"And more national carriers might look at this transaction and say, ‘We need to be there,’ " Grady added.
Officials of UnitedHealth and Sierra Health also pointed to the potential financial benefits of the merger.
The buyout would improve Sierra Health’s credit rating, thus lowering the company’s cost to borrow capital, said UnitedHealth general counsel Forrest Burke.
Burke said he expects "no material changes" in how Sierra Health operates.
UnitedHealth already has employment agreements with Sierra Health’s chief executive officer, chief operating officer, chief financial officer, chief information officer and the heads of the company’s sales, customer-service and legal staffs, among others. Sierra Health will also maintain its lines of service. Its operating platform, which includes its call-center operations and claims handling, will also remain, Burke said.
Plus, premiums should stabilize thanks to lower borrowing costs, said Frank Collins, Sierra Health’s general counsel.
Sierra Health would also save $20 million to $25 million a year on administrative costs associated with being a publicly traded company, Collins added.
Stockholders in the insurance company have thus far given the thumbs-up to the deal.
Of the 21 percent of outstanding shares with votes registered, 99.3 percent are in favor of the acquisition, Collins said.
Collins said he expects the transaction to get the official go-ahead from shareholders at a company meeting on June 27.
The public has additional opportunities to weigh in on the Sierra Health sale.
Following a statement from Gov. Jim Gibbons seeking additional public-comment time, Nevada Insurance Commissioner Alice Molasky-Arman said she would continue Thursday’s hearing at a later date. She’s also still seeking consumer input.
About 100 people attended the hearing, and more than 30 people registered to speak at the event.
Molasky-Arman could decide whether to approve the merger within 30 days, or she could hold her determination until after the U.S. Department of Justice releases its antitrust findings in the fall.
