Lovelace Health System has agreed to sell its insurance operation — with 108,000 members — to Blue Cross and Blue Shield of New Mexico for an undisclosed price. The deal is expected to close, assuming regulators approve, no sooner than year’s end.
Lovelace CEO Ron Stern said in an interview Monday that Lovelace Health Plan became too small to survive when it lost its bid earlier this year to provide managed care to Medicaid recipients through the state’s new Centennial Care program, which commences Jan. 1. Lovelace stood to lose 84,000 Medicaid managed care members, leaving it with just its 108,000 insured members in its commercial and Medicare Advantage plans.
Lovelace sold its Medicaid business to Molina Healthcare of New Mexico in August.
Stern said Lovelace will focus on and reinvest in its “core business” of hospitals, pharmacies and clinics.
Blue Cross and Blue Shield of New Mexico CEO Kurt Shipley said customers, including Medicare Advantage plan customers, who own a Lovelace insurance policy at the time of the sale will receive the same benefits at the same price for the remaining term of the policy once the sale is completed.
Medicare Advantage customers are in the middle of their enrollment period, which ends Dec. 7. Shipley said Medicare beneficiaries who already have selected Lovelace insurance will receive the same coverage and premium in 2014 from BCBSNM.
The companies also entered into what Stern described as a “very, very long term” provider agreement that will allow Blue Cross and Blue Shield members to use Lovelace hospitals, clinics and pharmacies.
The deal also heals last year’s spectacular falling out between Lovelace and ABQ Health Partners when the companies couldn’t reach a new provider agreement. Thousands of Lovelace members had to choose whether to keep their Lovelace insurance or leave Lovelace in order to keep their ABQ HP medical care providers.
Lovelace Health Plan does not include ABQ HP in its network, but the practice’s physicians and other staff still work in Lovelace Health System hospitals, and ABQ HP accepts Blue Cross and Blue Shield insurance. Lovelace members when they become Blue Cross and Blue Shield members will be able to use ABQ HP providers, Shipley said.
Lovelace had been rumored to be negotiating a new provider agreement with ABQ HP for several months. Stern would not confirm the rumor, but he said, “We’ve had a warming relationship with ABQ Health Partners. Their physicians continue to work in our hospitals. We value the quality of their care.”
Stern said about 300 people work for Lovelace Health Plan, and the company “is going to work extremely hard” to place those who want them into jobs at BCBSNM and in the Lovelace Health System. Those who cannot be placed will receive “appropriate severance packages.”
BCBSNM has been on a hiring binge to meet Centennial Care requirements. Shipley said the “vast majority” of those jobs have been filled. He said BCBSNM has hired 300 to 400 new employees recently.
Shipley said the Lovelace transaction will increase BCBSNM membership from 400,000 covered lives to about 500,000. With Centennial Care enrollment under way, Shipley estimated the company will have 550,000 members in the coming year.
Presbyterian Health Plan has about 270,000 commercial, Medicare, Medicaid and other members, according to its latest filing with the Office of the Insurance Superintendent.
About 70 percent of BCBSNM members live outside of the Albuquerque area. Shipley said the deal will significantly increase the company’s presence in the state’s largest metropolitan area. “We would always have loved to have a bigger presence in Albuquerque,” Shipley said.
Lovelace began offering insurance through a health maintenance organization it formed in 1973, when Lovelace was still a physician-owned multi-specialty medical practice.
Ardent Health Services, a Nashville-based hospital company, bought Lovelace in 2002 and along with it the Lovelace insurance operation. At that time the insurance plan had 167,700 commercial, Medicare and Medicaid members.
Shipley said the companies have worked together for years, but they began discussing ways they could help each other during last year’s ABQ Health Partners flap.
Stern said the rapidly change health care environment, including changes wrought by the Affordable Care Act, will force many health plans to face the decision Lovelace faced.
“A health plan of modest size over time will be challenged in product development, sophistication, technology, the ability to hire talent and in their ability to take their business relationships with hospitals and doctors into the future,” Stern said.