Health Systems-WellPoint Deal Showing More Strain

Health Systems International on Thursday accused WellPoint Health Networks and its majority shareholder of violating the terms of their $1.6-billion merger agreement, the latest sign that the deal is disintegrating.

Health Systems also called on WellPoint and its 80% owner, Blue Cross of California, to agree to non-binding mediation, saying it “firmly believes” all issues can be resolved.

But sources close to the situation said it appears unlikely that the companies will reach a merger agreement and that their public statements appear to be “posturing” for the litigation that is expected should the deal fall through.

Health Systems said it objects to the nomination of individuals with “close personal or business ties” to WellPoint Chairman Leonard Schaeffer to the board of the new company.

WellPoint spokesman John Cygul called Health Systems’ statements “totally untrue.” He accused the company of a “strategy of disinformation and intimidation designed to advance the personal agenda of [Health Systems Chairman] Malik Hasan at the expense of shareholders and the people of California.”

John Van de Kamp, a former California attorney general, said he has volunteered to serve as a mediator in the dispute.

“I think both parties would be irresponsible if they didn’t meet with an independent mediator,” said Van de Kamp, a Los Angeles lawyer who represents a health care charity that is Health Systems’ largest shareholder.