State approves sale of QualChoice

The application by Catholic Health Initiatives of Denver to buy QualChoice Health, the second-largest health insurer in Arkansas, was approved by the Arkansas Insurance Department after a 15-minute hearing Tuesday.

Catholic Health Initiatives is the parent of Little Rock-based St. Vincent Health System. The acquisition will mean that the state will have another insurer offering coverage statewide through its insurance exchange, according to Insurance Commissioner Jay Bradford.

William “Bill” Lacy, deputy commissioner, conducted the hearing instead of Bradford, who was attending a funeral. Bradford approved the application in absentia.

Catholic Health Initiatives is the third-largest Catholic health organization in the United States. It purchased Mercy Hot Springs hospital on April 1, raising its ownership of hospitals to 88 in 18 states.

In its QualChoice filing, Catholic Health lists seven major acquisitions in its fiscal year that ended June 30, raising its asset total to $19.3 billion from $15 billion a year earlier.

The amount paid to the shareholders in QualChoice was not included in the voluminous document file submitted to the Insurance Department. The share price will be determined when the transactions between the shareholders and Catholic Health closes.

The filing states that Catholic Health will not borrow money to acquire QualChoice.

Juan Serrano, a Catholic Health senior vice president, said in sworn testimony that he does not believe the deal will lessen competition in the state or create a monopoly.

Bradford has said the resources of Catholic Health will give the state another strong in-surer. QualChoice is a distant second to Blue Cross and Blue Shield of Arkansas in market share.

“They have expressed the desire to grow the company in Arkansas” and maintain headquarters in Little Rock, Bradford said after returning from the funeral. Policyholders should see no difference in their coverage, he added.

Blue Cross and Blue Shield of Arkansas and the national Blue Cross and Blue Shield Association currently offer statewide coverage through the state insurance exchange.

Another company, St. Louis based Centene Corp., has said it intends to offer plans in every county for coverage starting in 2015, up from 29 counties this year, Bradford said recently.

QualChoice is a health maintenance organization created in 1996 and licensed in all 75 Arkansas counties, though it writes coverage only in five of the state’s seven underwriting regions defined by the Arkansas insurance exchange established to provide coverage under the federal Patient Protection and Affordable Care Act.

St. Vincent is a shareholder in QualChoice. The other stakeholders are Arkansas Children’s Hospital; Tenet Health System Medical Inc., a national hospital chain; and TriZeto, a software company and the majority shareholder.

“I predict they’ll expand QualChoice coverage to [other states],” Bradford said earlier this year.

That sentiment was echoed at that time by Serrano.

“We regard Arkansas as a fantastic place to develop our health insurance capabilities as we strive to better serve communities here and across the nation,” Serrano said in an April 2 release when Catholic Health announced its intent to move forward with the acquisition.

Mike Stock, QualChoice chief executive officer, and Randall Crow, chief financial officer, will keep their positions, Catholic Health said in its filing.

Stock has said QualChoice has about 150 employees and that he expects the number to grow.

QualChoice offers abortion coverage, if it is warranted under the following reasons listed on the company’s website: the mother’s life is endangered, the pregnancy is the result of rape or incest, the fetus has been diagnosed with a defect, anomaly or malformation deemed “incompatible with life.” Qual-Choice does not cover “elective termination of pregnancy,”according to its website.

Bishop Anthony Taylor of the Little Rock Diocese met with Catholic Health Initiatives officials conducting due diligence on the matter, said Michael Romano, the system’s national director of media relations.

Taylor was instrumental in blocking the proposed sale of Mercy Hospital in Hot Springs last year to Capella Healthcare, a Tennessee-based for-profit chain.

He said he was concerned that Capella might not adhere to a ban on elective abortions after an initial five-year period of ownership. The Federal Trade Commission said it would fight the sale on competition grounds.

Business, Pages 27 on 04/30/2014

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