Mercy Health System Announces Sale of Its Interest in AmeriHealth Mercy
Independence Blue Cross and Blue Cross Blue Shield of Michigan partner to expand services to Medicaid beneficiaries nationally through AmeriHealth Mercy
PHILADELPHIA, PA — Two of the nation’s largest not-for-profit Blue health insurers, Independence Blue Cross (IBC) and Blue Cross Blue Shield of Michigan (BCBSM), announced this morning that they will be partnering to expand services to Medicaid beneficiaries nationally through the AmeriHealth Mercy Family of Companies, a top-tier, best-in-class Medicaid managed care organization headquartered in Philadelphia.
IBC is the leading health insurer in Southeastern Pennsylvania with 3.1 million members and BCBSM is the leading health insurer in Michigan with 4.3 million members. IBC has shared equal ownership of AmeriHealth Mercy since 1996 with the area’s largest Catholic health system, Mercy Health System. Through the transaction announced today, Mercy Health Plan’s (a subsidiary of Mercy Health System) interest in AmeriHealth Mercy will be acquired and IBC and BCBSM will provide additional capital to support AmeriHealth Mercy's expected growth.
AmeriHealth Mercy is one of the country’s largest Medicaid companies, serving almost 800,000 members in Medicaid managed care plans in three states. AmeriHealth Mercy also offers other services such as pharmacy benefits management and behavioral health care to an additional 3.2 million Medicaid, Medicare, and SCHIP beneficiaries in 11 states. With the additional resources this transaction will bring, the organization is now better positioned to offer turnkey, cost-effective, comprehensive Medicaid managed care coverage and services to Medicaid consumers nationwide and to the increasingly, financially strapped state governments that provide Medicaid coverage.
This agreement between IBC and BCBSM will also provide an opportunity for Blue health insurers nationwide to expand into the Medicaid market today and to take advantage of the enormous growth expected in Medicaid over the next few years. The 39 independent Blue health insurers in the U.S. serve all 50 states and cover one in three Americans, but are not widely active in the Medicaid market. Two-thirds of Blue health insurers do not currently serve Medicaid consumers. In 2014, the Patient Protection and Affordable Care Act expands Medicaid eligibility across the United States, and this change will increase the number of people covered by Medicaid by 16 million by 2019, according to the Kaiser Family Foundation.
“In this unprecedented time of transformation in health care, we are working strategically with leaders in our industry to pioneer new ways of doing business that will enhance the health and wellness of the people and communities we serve,” said Daniel J. Hilferty, who became IBC’s president and CEO in 2010 after serving in that role at AmeriHealth Mercy for 13 years beginning in 1996. “We are excited about partnering with Blue Cross Blue Shield of Michigan to lead AmeriHealth Mercy, an organization known for its innovative and industry-leading approach to Medicaid managed care and for a deep commitment to the people it serves.”
“Blue Cross Blue Shield of Michigan has invested in a top-tier, best-in-class national Medicaid company, AmeriHealth Mercy Family of Companies,” said Daniel J. Loepp, BCBSM’s president and CEO. “The investment gives us a national presence in the Medicaid market and we gain expertise that we can apply in providing services to Medicaid consumers in Michigan.”
“We’re excited about this development, because it brings us a step closer to realizing our vision of leading America in health care solutions for the underserved,” said Michael A. Rashid, AmeriHealth Mercy’s president and CEO. “The new ownership arrangement will allow us to serve more people who need access to quality care, enhance information sharing with doctors, hospitals, and other health care professionals, and expand products and services for our members.”
H. Ray Welch, Jr., president and CEO of Mercy Health System, acknowledged a very successful 15-year partnership between Mercy Health Plan and IBC and said the transaction provides the “additional resources to implement key initiatives in the Mercy Health System strategic plan that are designed to transform the health care delivery model by reducing costs and expanding collaboration with patients, health care providers, and insurers to coordinate care across the continuum.” He added that the Mercy Health System is “committed to our vision of being a leader in providing access to quality and compassionate health services that improve the health of individuals and communities.”
Mercy Health Plan will be paid $170 million for its 50 percent ownership interest of AmeriHealth Mercy. BCBSM will be acquiring a minority interest in AmeriHealth Mercy. Mercy Health Foundation will also receive a series of contributions over a period of 7 years, which will support Mercy Health System's charitable mission to deliver accessible and quality care and other health care initiatives. IBC and BCBSM have also agreed to provide additional capital to support AmeriHealth Mercy's expected growth and expansion. The transaction, expected to close in 45 to 120 days, is subject to certain regulatory approvals as well as other customary closing conditions.
With premier operational and health care capabilities, AmeriHealth Mercy is nationally respected for delivering quality, cost effective management of medical care, behavioral health care, and pharmacy benefits. In addition, the company provides expertise in customer service, informatics, information systems, claims management, enrollment, and 24/7 nurse triage support — all geared towards meeting the unique needs of people who receive their health benefits through Medicaid.
Today’s announcement comes at a time when mounting government budget woes are leading states to turn to Medicaid managed care, which is designed to provide quality health care at a lower cost than fee-for-service Medicaid. According to a 2010 report from the National Association of State Budget Offices, Medicaid is on average a state's second largest budget obligation after education, and averages 22 percent of total state spending.
AmeriHealth Mercy provides Medicaid managed care services directly to Pennsylvania, Indiana, and South Carolina and has subcontracts to provide these services in Kentucky and New Jersey. Recently, AmeriHealth Mercy was selected over eight other competing bidders to provide Medicaid managed care coverage in Louisiana. AmeriHealth Mercy also provides services in other states through its behavioral health and pharmaceutical management services.