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Wellpoint Health Networks Turns East for an Acquisition

The ink barely dry on its merger termination agreement with Health Systems International, Wellpoint Health Networks has acquired the health insurance business of Massachusetts Mutual Life Insurance Co.

Company officials say the deal, valued at $380 million, is "a key element in Wellpoint's expansion program."

Wellpoint's acquisition of the Group Life and Health subsidiary adds about 1 million to its membership roster. Group Life and Health is licensed to do business in 48 states, but its core operations are clustered in the most populous states.

Almost a year ago, Wellpoint announced its intent to merge with Health Systems International and create the largest publicly traded HMO. But as the deadline loomed, no final agreement between the two companies could be ironed out. Reportedly, discussions broke down when Wellpoint Chairman Leonard Schaeffer and Health Systems CEO Malik Hasan, M.D., could not agree on dividing control of the new company.

For the third year in a row, Blue Shield of California is reducing overall reimbursement rates for physicians and medical services. The cuts will average 5 percent. Since the nonprofit company adopted a resource-based relative value scale in 1994, reimbursement fees have been altered to follow Medicare fees.

Company spokesman Mike Odom says the cuts will mainly affect procedure-based services such as surgical, diagnostic and laboratory work. Payment for consultation and evaluation services will be increased by 2.5 percent. Reimbursement for Ob/Gyn services will remain about the same.

Blue Shield of California says physicians who contract with the company have agreed to the adjustments.

Last November, Louis Harris and Associates asked 1,000 Americans for their views on nonprofit and for-profit HMOs and hospitals. Respondents were split about which system is better able to deliver high-quality care at a reasonable price. But nonprofits were decisively hailed as good for the community.


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