Our Take: Elevance Health’s family of Blue Cross Blue Shield state plans will grow to 15 with acquisition of BCBS Louisiana
Indianapolis-based Elevance Health (formerly Anthem) signed a definitive agreement last Monday to acquire Blue Cross and Blue Shield of Louisiana (BCBSLA) for an undisclosed amount.
The two companies jointly own Healthy Blue, a plan that serves Medicaid and Medicare dual eligible beneficiaries in Louisiana.
If the acquisition is completed later this year as the companies anticipate, Elevance Health’s affiliated Anthem Blue Cross Blue Shield plans will operate in 15 states.
The deal will need to pass regulatory scrutiny and meet customary closing conditions. If it does and the acquisition is successful, Elevance Health will gain more than 1.9 million members and $4.5 billion in revenue.
The companies said in a press release that BCBSLA’s headquarters would stay in Baton Rouge, though the company’s workforce of approximately 3,000 would become employees of Elevance Health.
“Blue Cross and Blue Shield of Louisiana is a strong and vibrant company with a history of serving Louisianians for almost 90 years. However, to remain strong in today’s environment with an ability to provide leading innovations, products, and capabilities, we concluded that we needed a partner that could help us deliver these faster and better than we could alone,” said Dr. Steven Udvarhelyi, CEO of BCBSLA.
After the transaction closes, a multibillion-dollar foundation called the Accelerate Louisiana Initiative will be created to address the needs of Louisiana residents. The foundation’s mission will be to improve people’s lives and health by addressing health inequities and strengthening local communities.
Elevance Health just reported revenue of $156.6 billion in 2022, an increase of 13% relative to the previous year, and net profit of $6 billion, a slight decrease from $6.1 billion a year earlier. The company’s membership increased 4.8% from 2021 to 47.5 million.
Our Take: During last Wednesday’s earnings call, an analyst with Credit Suisse asked senior executives at Elevance Health about their confidence level with regard to navigating the regulatory approval process to complete the BCBSLA acquisition.
The analyst also mentioned the $2.67 billion antitrust settlement from last August, which stemmed from a class-action lawsuit in which plaintiffs alleged that Blues plans split geographic areas to avoid directly competing with one another. As part of the settlement, the Blue Cross Blue Shield Association and independent affiliates named as defendants in the lawsuit agreed to make changes in certain business practices that allegedly squelched competition.
Further, Healthcare Dive reported last week that some industry experts are questioning whether the planned acquisition of BCBSLA will signal the start of a trend seen in the 1990s, in which for-profit organizations like Elevance, known then as Wellpoint, acquired nonprofit BCBS plans. State regulators challenged a number of those transactions as plans tried to convert from nonprofit to for-profit entities. BCBSLA is a nonprofit organization.
On the earnings call, Elevance Health’s CEO, Gail Boudreaux, didn’t directly address any of these issues. Instead, she noted that the BCBSLA acquisition “will be subject to normal closing conditions” and referred to it as “very much a strategic acquisition.”
“The board of Blue Cross and Blue Shield of Louisiana really wanted to have a greater impact and accelerate the strategy that they put in place,” she said. “This is a solidly run, 4.5-star Medicare plan.”
“And the other thing is we’re excited because this brings [us] the 15th Blue state. So … just as we have in our other 14, we’ve kept our deep local roots in a new market, but we also can bring our national scale and access to our portfolio of innovative solutions and capabilities, again, accelerating what the Blue Cross Blue Shield strategic focus has been, and that supports the community.”
John Gallina, Elevance Health’s chief financial officer, said during the call that 2023 will be a year in which Elevance optimizes its health benefits business while continuing to grow and expand the capabilities within Carelon, Elevance’s subsidiary that comprises behavioral health, advanced analytics and services, complex care, digital assets, and pharmacy benefit manager Carelon Rx (formerly IngenioRx).
Elevance has been building out its infrastructure within Carelon over the last 18 months to prepare for the expansion Gallina alluded to. As an example, in November, the company announced that it would acquire BioPlus and integrate the specialty pharmacy into Carelon.
What else you need to know
Minnesota’s attorney general’s office asked Sanford Health and Fairview Health to postpone the closing of their intended merger. The health systems, based in Sioux Falls, S.D. and Minneapolis, respectively, planned to close the transaction on March 31, but the AG’s office wants more time to investigate the deal’s potential ramifications and finish going through thousands of public comments received online and at public meetings. The University of Michigan also expressed concerns to the AG’s office regarding its stake in the matter — the university announced plans earlier this month to reacquire from Fairview the medical center and other facilities on its campus. Another public meeting is scheduled for Jan. 31, and the state legislature is planning to hold hearings on the proposed merger. The university, Minnesota’s previous AG, and state lawmakers became embroiled in disputes surrounding Sanford and Fairview’s attempt to merge in 2013, and Sanford’s CEO at the time stepped away from the negotiations. The combined health system would have 58 hospitals and annual operating revenue of approximately $14 billion.
Amazon introduced a new prescription drug service called RxPass that gives Prime members access to unlimited generic medications for a flat monthly fee of $5, with no charge for delivery. The generic drugs available through the new service include approximately 50 drugs prescribed to treat more than 80 common health conditions, such as high blood pressure and anxiety. The service is available “in most U.S. states,” Amazon said in a press release; according to Healthcare Dive, it’s available in 42 states. Members cannot use insurance to pay for the $5-a-month RxPass subscription.
Optum Rx, UnitedHealth Group’s pharmacy services company, launched a tool for its clients called Price Edge that compares direct-to-consumer pricing for a given generic drug versus the price a member would pay using insurance. Price Edge then applies the lowest available price to the transaction. All transactions initiated through Price Edge automatically count toward members’ deductibles and out-of-pocket maximums, Optum Rx noted in a news release, adding that because the tool captures all transactions within the member benefit, it also “maintains continuity of safety protocols and safeguards against contraindications between medications.”
UCHealth and Parkview Health System signed a definitive agreement Tuesday, following through on the letter of intent they signed in October to combine. According to the announcement, Aurora, Colo.-based UCHealth will begin investing nearly $200 million into Pueblo, Colo.-based Parkview Health System and the local community in mid-2023 as Parkview and its employees join UCHealth — provided regulatory authorities approve the transaction and the timeline for completing the deal proceeds as planned. UCHealth has 12 hospitals and hundreds of physicians in Colorado, southern Wyoming, and western Nebraska. Parkview is licensed for 350 beds, has an estimated 3,000 employees, and “provides a skilled medical staff of over 370 physicians.”
Chicago-based Rush University System for Health (RUSH) and CVS Accountable Care Organization are collaborating as participants in the ACO REACH model. The organizations said in a press release that their collaboration “enables patients seeking health services at various ACO REACH-participating MinuteClinic locations in Chicago and Evanston to access care with RUSH and other ACO REACH entities for follow-up primary and specialty care.” RUSH will be the only Chicago-area academic medical center participating in CVS’ first ACO in the ACO REACH program.
Intermountain Healthcare officially became Intermountain Health last Monday, a change that was announced last year. The health system also updated its logo as part of the rebranding campaign and said in a news release the updated look would be phased in over the next several years.
What we’re reading
Organization and Performance of Health Systems. JAMA, 1.24/31.23
Health Systems—The Present and the Future. JAMA, 1.24/31.23
Seven Burning Questions Related To Commercial Prices For Health Care Services. Health Affairs Forefront, 1.23.23
What else we’re reading
Into Thin Air: A Personal Account of the Mt. Everest Disaster, by Jon Krakauer. If you haven’t read this book, run down to your corner bookstore and read it instead of watching football today. Well, not really, but this well-known first-person account of an Everest climb gone wrong is astounding. This is my third time through it. The Wall Street Journal says Into Thin Air “ranks among the great adventure books of all time.”