Deal all but over; two resist

Just how complete is UnitedHealth Group's $2.6 billion buyout of Sierra Health Services?

The deal is so done that Sierra Health shares were no longer trading on the New York Stock Exchange on Tuesday. Sierra Heath's Web site broadly displays the UnitedHealthcare banner. And operators who answer the company's general phones greet callers with the UnitedHealthcare name.

But the federal Justice Department's Monday approval of the buyout wasn't enough to stop the Service Employees International Union and the Nevada State Medical Association from consulting with attorneys about their legal options.

Larry Matheis, executive director of the state medical association, said late Monday that litigation over the deal "is possible," and Hilary Haycock, a spokeswoman from the SEIU, said the group was discussing potential action with its lawyers. The federal government's requirement that UnitedHealth divest its Medicare Advantage segment doesn't ease their concerns that the company will dominate too much of the local managed-care market, which could in turn suppress marketwide benefits for patients and reimbursements for doctors.

Industry watchers say there's little either group can do, though.

David Trout, Virginia-based owner and publisher of industry newsletter The M&A Researcher, said he's never seen a deal reversed after its close in the 12 years he's tracked mergers and acquisitions.

"I can't imagine anything more unusual, or more out of the world of fantasy, than the medical association doing something," Trout said. "I've never seen anybody come in late and add conditions to something the Department of Justice has signed off on."

Peter O'Neill, vice president of investor and public relations for Sierra Health, said Tuesday that company officials aren't expecting legal action against the deal.

"I don't know what their options are," O'Neill said. "We have now officially received approval from not only the (Nevada) attorney general, but from the Department of Justice and the Nevada Division of Insurance. I'm not sure what their legal options would be with that kind of approval."

O'Neill said the trade groups' worries are baseless. Sierra Health will continue under its local management and processes, and clients will notice "absolutely no changes" as a result of the deal.

"We obviously understand their concerns, and we disagree with their concerns," he said. "We hope to prove with our actions that their concerns are unfounded."

It's possible the groups could seek an injunction against UnitedHealth's Medicare Advantage sale to Humana, Trout said. And any steps that would drag out the sale beyond 90 days could technically upend the deal, because the divestiture is a condition of federal and state regulators' approval. Convincing a judge to go against the Department of Justice, however, would be "expending resources on running into a brick wall," Trout said.

"I can't imagine the amount of time and money that would be needed to do something like that," he added. "You're basically taking on the Department of Justice. And they are what they are. They represent doctors. They don't decide merger law."

Even if the saber rattling is futile, Trout said, it does serve a purpose.

The groups' vocal opposition to the buyout was likely the reason the federal government took an extra couple of months to vet the deal, Trout said. Sierra Health and UnitedHealth officials said they'd expected approval by the end of 2007, but detractors argued loudly against the purchase in statewide hearings and before Congress. Their comments encouraged a closer look among regulators.

Those efforts, and the resulting delay in closing the sale, allow the SEIU, doctors' groups and politicians to tell their members and the public that they fought hard for people's rights.

Additional agitation against the merger will also help keep the groups in the news, and that could bolster their clout in the long run.

"It's in the best interest of these big lobbying groups to stay visible," Trout said. "They've obviously put a lot of time and energy into this. It's to their benefit to let their members know they're on the job. That may pay dividends in some other situation."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or (702) 380-4512.