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PacifiCare Health Bids to Buy Western Health Assets

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San Diego County Business Editor

PacifiCare Health Systems, a health maintenance organization based in Cypress with more than 500,000 subscribers, said Thursday that it has made a friendly bid to acquire assets of troubled Western Health Plans of San Diego, which runs the 130,000-subscriber HMO called Greater San Diego Health Plans.

The acquisition, if consummated, would make PacifiCare the state’s third-largest HMO after Kaiser Permanente, with 4 million members, and HealthNet, with about 700,000 members, said PacifiCare Chief Financial Officer Wayne Lowell.

PacifiCare, which made the bid at Western’s invitation, would not disclose the amount it offered to pay for the assets, which include Western’s membership, provider contracts and contracts with employers. PacifiCare’s subscriber base includes 360,000 members in Southern California; the balance are in Oregon, Texas and Oklahoma.

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The two parties will begin negotiating a definitive agreement today.

Western is a publicly traded company whose stock is held mainly by 1,500 San Diego physicians who also provide services to the subscribers. Western Health Plans closed up 18 cents at 69 cents per share in American Stock Exchange trading while PacifiCare stock was unchanged in over-the-counter trading at $26.75.

Deals Fall Through

Similar to many other HMOs in the country, Western has suffered serious financial problems in recent years, resulting in several management reshufflings and scaling back of operations. With shareholder equity of negative $15.8 million as of March 31, Western has been looking for an investor or buyer for the past year.

Two other acquisition deals involving Western fell through in recent months, including a $21-million offer from a consortium of hospitals led by Sharp HealthCare and Scripps Memorial of San Diego, as well as a $15-million offer from Mercy Hospital of San Diego.

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