PacifiCare May Sell Off Florida Units, Focus on Other Markets
CYPRESS — PacifiCare Health Systems Inc. may exit the competitive Florida health-plan market to focus on other markets that it would enter through its planned $2.1-billion acquisition of FHP International Corp.
The managed-care company said Dillon, Read & Co., its investment banker for the FHP transaction, is exploring various options, including a sale.
PacifiCare entered the Florida market for health maintenance organizations, or HMOs, just two years ago by acquiring two smaller, troubled health-care plans. Analysts expected the company to lose about $15 million to $20 million there this year, and another $20 million in 1997.
“Florida may be a lot less important to them now, given the opportunities they have with FHP,” said Ken Laudan, a Hambrecht & Quist analyst. “While Florida was attractive, the market dynamics are much different than in California.”
The company is the nation’s largest provider of health care to patients covered by Medicare, the federal health-care program for the elderly. FHP ranks third. But in Florida, PacifiCare serves only about 51,000 members. By contrast, market leaders Humana Inc. and United HealthCare Corp. each have about 300,000 members in the state.
In addition, Florida is PacifiCare’s only major East Coast operation, as the company mainly serves California, Oregon, Washington, Oklahoma and Texas. The FHP acquisition, expected to close in late December or January, would add Arizona, New Mexico, Nevada, Utah, Colorado, Illinois, Indiana, Kentucky, Ohio and Guam.
“Their energy is better spent in a market that is less developed than Florida,” said Ed Keaney, a Volpe Welty & Co. analyst. “Colorado is attractive, Texas, Northern California, the Pacific Northwest.”
“There are 30 HMOs in Florida,” said Todd Richter, a Dean Witter analyst. “Any or all of them could be potential buyers.” He said Kaiser Permanente, which announced plans to buy Humana’s unprofitable Washington-area plans, probably wouldn’t be interested.
PacifiCare’s stock rose $3.875 per share Friday to close at $80.75 in Nasdaq trading.
