Columbia / HCA Buys Most of Ohio Blue Cross
Columbia/HCA Healthcare Corp. is broadening its strategy of buying up hospitals, clinics and home health businesses by acquiring on Friday most of Blue Cross & Blue Shield of Ohio, the state’s largest health insurer.
The deal, worth $299.5 million, represents the first foray into the insurance business by Columbia, the nation’s biggest for-profit hospital chain.
It is a combination that has caused trouble for others, prompting cautionary comments from analysts Friday. Nonetheless, investors applauded, sending Columbia’s shares up $1 to $57.75 on the New York Stock Exchange.
Columbia’s main focus is providing health-care services in local communities by building networks of hospitals, home-care agencies and outpatient centers for diagnostics, minor surgery and physical rehabilitation.
Insurers such as Blue Cross seek to cut health-care costs by fostering competition among service providers such as Columbia, pushing them to charge less and become more efficient.
The acquisition also could put Columbia into competition with health-maintenance organizations that now buy services from its hospitals and clinics.
Such conflicts crippled another combined hospital-HMO company in the early 1990s. Humana Inc., based in Louisville, Ky., split in two in 1993 after finding that its hospitals and HMOs were working against each other.
“There is potential, obviously, for [internal] conflict,” said John Hindelong, an analyst for Donaldson, Lufkin & Jenrette in New York.
“But there is also a chance to complement the skills on the insurer side with the skills on the provider side. It becomes a matter of management,” he said.
Hindelong also noted that hospitals today are already under much more pressure to be efficient than they were years ago.
Cleveland-based Blue Cross & Blue Shield of Ohio covers 1.5 million people with traditional insurance and managed-care plans. It generates $2 billion in annual premiums.
The purchase must be approved by the state insurance department and Blue Cross policyholders.
