Sunday, May 31, 1998

North Texas HMO being sold

DALLAS (AP) -- After losing $9 million in the first quarter, Kaiser Permanente announced Friday it was selling its North Texas HMO to Sierra Health Services Inc.

Terms were not disclosed on the deal, which still faces approval by regulators and directors of both companies, The Dallas Morning News reported in Saturday editions.

For the past two years, Kaiser has tried but failed to build a foundation from Dallas-Fort Worth to expand throughout Texas and the Southwest.

But membership fell from 128,992 last year to 124,135 and financial losses have grown.

Sierra, based in Las Vegas, runs Nevada's largest health plan, a military health services company, and indemnity and workers' compensation insurers. It has a total of 609,000 members, including 190,000 in HMOs.

They include HMO Texas, an 18,000-member health plan serving Houston.

Both Kaiser and Sierra said they expect the sale to close by Oct. 31, meaning that Kaiser's members would become part of HMO Texas by that date.

Sierra also has agreed to purchase the 150-member Permanente Medical Association of Texas, which provides exclusive services to Kaiser. Kaiser members will be able to keep their current doctors or select another physician affiliated with Sierra's health plan, officials said. Unlike its exclusive arrangement with Kaiser, the Permanente group will now be allowed to contract with other health insurers. Likewise, Sierra will recruit outside physicians to join its network, although it's unclear how many doctors will be added.

Dr. David Lawrence, Kaiser's corporate chairman and chief executive officer, announced the potential sale of the North Texas unit in February.

The sale "allows us to concentrate on markets where our unique, high-quality approach to health care -- through nonprofit, group practice medicine -- more effectively meets the needs of people in those communities," Lawrence said Friday in a written statement.

The sale of the North Texas HMO marks the first time that Kaiser Permanente Group, based in Oakland, Calif., has abandoned any of its divisions. Kaiser is the largest nonprofit insurer in the country with 9.1 million members.

Dr. Anthony Marlon, Sierra chairman and chief executive, said the expansion to Texas was a natural one.

"In Kaiser Permanente, we found a unique opportunity to export our expertise in running medical groups and insurance operations to a state where we already have regulatory, business and provider relationships," he said in a statement.