Mergers Remain Hot Topic In Managed Care

Mergers and acquisitions continue to be one of the hottest topics in managed care, as health plans increasingly find themselves in a position where they need to grow or else, according to A.M. Best, the rating company.

“A.M. Best expects growth of stockholders' equity in 2004 to be augmented by significant increases in goodwill because of the recent uptick in merger and acquisition activity, especially when the merger between Anthem and WellPoint closes,” the company says in a recent newsletter.

Anthem's planned purchase of WellPoint Health Networks be completed this month and would create the largest health plan in the country — $27.1 billion in assets, 40,000 employees, and 26 million members in 13 states. The new company would serve 1 in 3 of the nation's BCBS members and would be called WellPoint. Anthem is offering $16.4 billion in cash and stock for WellPoint.

“The recent transactions have been driven by the desire to increase scale and fill in geographic gaps in light of a slowing economic recovery,” says A.M. Best. “The health care industry overall may be seeing the end approaching to the significant expansion of earnings experienced over the past several years, thus triggering acquisition activity to maintain Wall Street's growth expectations.”