Caremark International to Buy 29 Southland Clinics : Health care: Deal does not include Cigna Corp.’s HMO business.

Forging one of the largest medical groups in the nation and a powerhouse in Southern California, Caremark International Inc. said Thursday that it is acquiring 29 Southland medical clinics from Cigna Corp. for an undisclosed sum.

The deal marks the end of one of the nation’s oldest “staff-model” health maintenance organizations, in which an insurer hires salaried doctors to work exclusively at HMO-owned clinics and hospitals. The predecessor of Cigna’s Southern California operations, the Ross-Loos medical group, was founded in Downtown Los Angeles in 1929, predating the Kaiser Permanente staff-model HMO founded in 1945 by industrialist Henry J. Kaiser.

Caremark, a giant health care company based in Northbrook, Ill., is acquiring clinics in Los Angeles, Orange, Riverside and San Bernardino counties that serve about 300,000 patients of Glendale-based Cigna HealthCare of California.

Caremark is buying only the Cigna clinics and other assets. It is not buying the HMO business of Cigna, so the purchase would mean no change in medical coverage for Cigna members.

The purchase continues an aggressive move by Caremark into the Southern California medical market. Earlier this year, the company paid more than $100 million to buy the Friendly Hills Healthcare Network, a large medical group in Los Angeles and Orange counties.

The Cigna acquisition would give Caremark a medical network serving about 400,000 HMO members, with 47 clinics, 470 physicians and about 4,000 employees. Caremark officials said they expect the combined operations to generate $600 million in revenue in 1996.

Caremark said the deal will make it the nation’s largest provider of physician practice management services to medical groups specializing in managed care.

“This purchase gives us an even stronger position in the greater Los Angeles area, one of the most advanced managed-care markets in the country, with $33 billion in annual health spending,” said C.A. Lance Piccolo, Caremark chairman.

Caremark and Cigna officials said the deal will create a broad medical network stretching from northern San Diego County nearly to Santa Barbara, offering HMO members who choose the Friendly Hills network a wider choice of hospitals and doctors. Executives said the two operations are also complementary because of their experience in two fast-growing areas of the managed-care business. Friendly Hills has extensive experience with Medicare HMOs, while Cigna serves about 100,000 Medi-Cal recipients enrolled in private HMO plans in Southern California.

For Cigna, the deal offers a way to bolster its finances and its Southern California membership, which has had lackluster growth as other HMOs have posted hefty membership gains. Cigna has about 500,000 members in Southern California.

Leslie A. Margolin, general manager of Cigna’s Southern California operations, said Cigna’s staff-model business had been unprofitable in recent years. Cigna will now focus exclusively on its “network-model” HMO, in which it contracts with various doctor groups to provide medical services.

The deal requires state and federal regulatory approval.