Merger Takes Shape
Priority Health's job now is to sell itself to Care Choices customers and providers in southeastern
The purchase price is based on a formula that incorporates the number of Care Choices' approximately 143,000 members that Priority Health is able to retain after one year, Pocock said.
"We honestly don't know what the purchase price is," Pocock said. "If for some reason membership drops dramatically, we don't pay as much as if we're able to keep and grow the membership."
Rick Murdock, executive director of the Michigan Association of Health Plans, said that's not an unusual provision in similar deals around the country. However, the Priority/Care Choices deal and last year's more controversial Blue Cross Blue Shield purchase of M-CARE from University of Michigan have been the only two commercial line mergers in Michigan since the 1990s, Murdock said.
"We're starting to work now with the local employers and agents out there to convince them we have the products and services they want to offer their employees," Pocock said. "We're going to start calling on physicians in that network to make sure they agree to stay in our network."
Care Choices' current members won't see much in the way of change until the renewal of health coverage contracts, he said. The phrase "Underwritten by Priority Health" will be added to printed materials, but he said Care Choices membership cards will remain valid under current contracts.
"It should remain seamless and transparent to all the former Care Choices members," Pocock said. "We will eventually be introducing the Priority Health name in the southeastern region and phasing out the Care Choices name. It could be March of 2008 until the Priority Health name is fully in place over there."
Pocock said the number of full-time employees at Care Choices'
The number of workers was reduced by normal attrition and the elimination of duplicate services, but other positions may be added, he said.
Care Choices' senior leadership was retained, including Mike Koziara, vice president in charge of the eastern office; Jelka Petrovic, associate vice president of sales; Barry Coffield, director of operations; Miriam Bielski, director of customer service; Jeanne Dunk, director of provider network services; and Dr. Gil Burgos, medical director.
Byrne said he thinks it's a natural marriage.
"We have two cultures coming together that are nearly identical, and it makes you wonder, why didn't they do this a year or two ago?" Byrne said. "Care Choices found a really good suitor in Priority Health. The two companies seem to have a similar culture, similar mission, similar core values. Even their organizational structures are similar.
"There is almost no overlap in their coverage areas. It really is an excellent expansion for Priority. This is the kind of deal you should look for if you were to contemplate a merger."
Byrne and Murdock said the
Byrne added, "The Southeast Michigan market is more heavily weighted by union involvement. Priority Health is going to have to learn how to play ball in that kind of park."
Byrne added that about 25 percent of Care Choices membership belongs to unions. Care Choices is also a major plan for Ford Motor Co.'s salaried work force.
"I think that Priority Health has its organizational structure in really good order. Their sales force is really good, too," Byrne said. "I don't think they're going to find major problems in learning the
Priority Health, claiming 460,000 members, reported net income of $23.9 million in 2006 on total revenue of $1.35 billion. For 2006, Care Choices reported net income of $1.8 million on $305.3 million in revenue.