Recent Accomplishments

Lutheran Medical sells health plan to Amerigroup

Amerigroup Corp. is making its third purchase of a New York Medicaid managed-care plan in less than a decade, a transaction that will make it a behemoth among the state's Medicaid plans.



Lutheran Medical sells health plan to Amerigroup

Brooklyn hospital gets $85 million for Health Plus, its Medicaid managed-care company that generates a billion in revenue but faces tougher times as state reshapes health care payments for poor patients.

By Barbara Benson @Barbara_Benson
October 25, 2011 11:16 a.m.

Amerigroup Corp. is making its third purchase of a New York Medicaid managed-care plan in less than a decade, a transaction that will make it a behemoth among the state's Medicaid plans.

The publicly held insurer is buying substantially all of the operating assets and contract rights of Health Plus, one of the largest Medicaid managed-care companies in New York. Health Plus, established in 1984 by Lutheran Medical Center, currently serves approximately 320,000 members in New York state's Medicaid, Family Health Plus and Child Health Plus programs, as well as the federal Medicare program.

The purchase price is $85 million for a health plan that will generate an estimated $1 billion in revenue this year. The transaction, which is subject to regulatory approvals and other closing conditions, is expected to close in the first half of 2012.

In 2004, Amerigroup snapped up the nonprofit Medicaid plan Careplus, paying a record sum at the time to enter the New York market. Today, the state has the second-largest Medicaid enrollment in the country, with about 5 million New Yorkers in the program.

Of the state's nearly 3 million people enrolled in Medicaid managed-care plans in October—about 2 million of them in New York City—Amerigroup insures around 82,000 Medicaid managed-care enrollees, and has a total of 109,000 members in New York plans. The largest Medicaid managed-care plan in New York City is a hospital-owned plan, HealthFirst, with current Medicaid and Family Health Plus enrollment of around 430,000 in New York City.

“This acquisition will provide greater access to quality care for Amerigroup and Health Plus members, cost savings for the state and New York City, as well as provide a renewed investment in the local community," James Carlson, Amerigroup's chairman and CEO, said in a statement. "Our national expertise in coordinating care for low-income populations and people with disabilities, coupled with the excellence of Health Plus, will allow us to better serve current and new members, collaborate with providers and expand our patient-centered medical home model."

For Lutheran, the infusion of cash from the sale gives the Brooklyn hospital a financial cushion at a time when its competitors face mounting budget pressures.

"For a community safety net hospital like Lutheran, the acquisition is particularly critical since it will mean an infusion of dollars that will establish an endowment—something that Lutheran has never had before. It will strengthen our financial viability allowing us to reinvest in patient care for our traditional Medicaid and uninsured populations," Wendy Goldstein, CEO of Lutheran HealthCare, said in a statement.

Lutheran is exiting the Medicaid managed-care business at time when the Cuomo administration is moving more New Yorkers into managed care—and the health plans serving that population are racking up huge losses. The profitability of the nonprofit plans like Health Plus, known as Prepaid Health Service Plans, fell 18% in 2010 from a year earlier, while membership rose 7.7%. “2010 was not a great year for the plans,” said a spokesman for the New York State Coalition of PHSPs.

As membership soared, the plans weathered rate cuts last year. Their Medicaid managed-care enrollment rose 8.8% to 2.1 million members, but the PHSPs reported a 37% drop in profitability from that service, according to state data.

Other business lines fared no better for the PHSPs. Net losses for Family Health Plus and Child Health Plus in 2010 were $7.9 million and $6.9 million, respectively—and the health plans haven't turned a profit on those products for the past three years. PHSPs suffered a combined $40.6 million loss on Child Health Plus since 2006.

Amerigroup runs public health plans with enrollment of about 2 million members in 11 states.



Read more: http://www.crainsnewyork.com/article/20111025/HEALTH_CARE/111029937#ixzz1cH6tnx4k

http://www.crainsnewyork.com/article/20111025/HEALTH_CARE/111029937