Rock-Solid Information or Baseless Rumor?
Is Prudential Insurance Co., whose health-care business has been struggling amid bare-knuckles competition in California and elsewhere, preparing to sell a piece of the rock?
Some knowledgeable industry sources think so, noting widespread rumors that Prudential is shopping its health-care unit to prospective buyers, a move that would have particular significance for the California health-care market.
“The Prudential health-care business is for sale, and Cigna [Healthcare] is very strongly rumored as the buyer,” said one Southern California HMO executive who didn’t want his name used.
Not so, insist Prudential executives.
“There’s really nothing to these rumors about selling all or any major pieces of the health-care business at this time,” said Greg Scott, chief financial officer of Prudential’s health-care group.
Scott questioned whether rival HMO executives are intentionally throwing stones.
“It is open-enrollment time, and this puts doubts in customers’ minds,” he said. “It can be damaging.”
A Cigna spokesman said the company doesn’t comment on such rumors. Cigna Healthcare has about 700,000 members in California.
Prudential, with about 300,000 members, has had its share of problems of late.
Last month, the company lost a $4.5-billion contract to provide health-care services to 5.7 million American Assn. of Retired Persons members, a contract Prudential had held since 1981.
Prudential’s California health-care operations lost $24.5 million in 1995 and $5.4 million for the first six months of this year, according to California Department of Corporations figures. Its health maintenance organization for Medicare beneficiaries is said to be especially troubled.
Prudential, based in Newark, N.J., is among a number of mid-size health plans that industry analysts say are in danger of becoming also-rans as rivals strike mergers to pump up their market share. In California, for example, seven HMOs have more than 500,000 members. Prudential’s 300,000 members make it the state’s eighth-largest HMO.
Executive Change
It’s a safe bet that Dr. Mark Douglas Smith’s phone will be ringing a lot in coming months.
Smith, a physician, was recently named president and chief executive of California HealthCare Foundation, a giant health-care charity created by Blue Cross of California.
The Woodland Hills-based charity, with an endowment of $2.1 billion, is one of the 10 largest philanthropic organizations in the nation. Its creation was mandated by state regulators as part of Blue Cross’ decision to switch from nonprofit to for-profit status.
Smith was an executive vice president of Kaiser Family Foundation, where he specialized in such issues as AIDS and reproductive health since joining the group in 1991.
Smith is a graduate of Harvard University and has degrees from the University of North Carolina School of Medicine and the Wharton School of Business at the University of Pennsylvania.
Times staff writer David Olmos can be reached via e-mail at david.olmos@latimes.com
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