UMC allowed to challenge deal

Clark County commissioners granted administrators of the county-operated University Medical Center permission Wednesday to take legal or administrative measures to halt UnitedHealth Group’s $2.6 billion purchase of Sierra Health Services.

The commission’s action doesn’t guarantee action to prevent the deal; rather, it creates a mechanism for interceding in Sierra Health’s sale if UMC officials sense the purchase would translate into lower reimbursements for care. A drop in insurance payments could cloud UMC’s fiscal outlook.

Commissioners worry that UnitedHealth’s acquisition of Sierra Health might hurt health insurance coverage for patients of UMC. The county has worked for years with Las Vegas-based Sierra Health, and officials want assurances that insurance coverage would not change if Minnesota-based UnitedHealth took over.

“The concern is that we know Sierra and we understand how they pay and what our cash flow is likely to be with the claims filed with them,” Clark County Chairman Rory Reid said. “Given the nature of UMC’s financial history, we have to do everything we can to protect Clark County residents and protect UMC’s cash flow.”

The commission’s vote “officially allows a wait-and-see attitude,” said Peter O’Neill, vice president of public and investor relations for Sierra Health.

Tyler Mason, a spokesman for UnitedHealth, said in an e-mail that county commissioners “had every opportunity to participate in the public-hearing process” that state officials mounted over the summer. Still, Mason said, UnitedHealth officials are eager to meet with commissioners to address their concerns.

O’Neill noted that Kathy Silver, UMC’s chief executive officer, emphasized in Wednesday’s hearing the hospital’s positive long-term relationship with Sierra Health, and he added that the deal would leave local management and claims processes intact.

“Sierra has reached out to the commission previously, and we will continue to reach out to the county and the commission as the process moves forward to assure them there will be no changes in the way UMC is paid,” O’Neill said.

“There will be no impact” to UMC’s cash flow as a result of the merger, he said.

The commission is the latest group to weigh in since the two insurers announced the deal in March. The American Medical Association, the Nevada State Medical Association, the Clark County Medical Society and the Service Employees International Union have all decried the buyout.

The combined company would have more than 800,000 enrollees in Nevada, making it the largest managed-care insurer in the Silver State. WellPoint Health Networks, the No. 2 insurer, has about 270,000 members statewide. The deal’s detractors say the purchase would allot the new company nearly 100 percent of Nevada’s Medicare segment and 95 percent of the state’s fully insured HMO market. Such dominance would give UnitedHealth the clout to reduce reimbursements to doctors and hospitals for care, and to raise premiums on consumers, doctors’ groups and labor unions have said.

Competitive concerns led Gov. Jim Gibbons to send a letter in September to the U.S. Department of Justice and the Federal Trade Commission urging both agencies to carefully consider how the buyout would affect Nevada’s insurance markets. And Nevada Attorney General Catherine Cortez Masto said in August that her office would study the proposal to determine whether it complies with state law and serves the interests of Nevadans.

Executives of Sierra Health and UnitedHealth have said tabulations of their unified market share have ignored competition in the broader market, which includes a large number of self-insured corporations, as well as PPO and point-of-service plans. The two companies would have 28 percent of the market in commercial insurance for employers in Nevada and 18.9 percent of the statewide market in insurance for employers with two to 50 workers.

Nevada Insurance Commissioner Alice Molasky-Arman signed off on the deal in August, though she prohibited the companies from raising premiums and slashing benefits to cover merger costs. She also demanded that UnitedHealth develop specific plans to reduce Nevada’s number of uninsured residents.

The U.S. Department of Justice is nearing the end of its review of the merger.

Sierra Health officials said throughout 2007 that they expected the agency’s approval before the year’s end. That didn’t happen, though. O’Neill blamed the logistics of holiday vacations and travel for the delay in the federal government’s decision. He said Sierra Health executives talk daily with federal officials, but he declined to comment on a time line for federal approval, or what conditions the Department of Justice might place on the buyout.

A representative of the Department of Justice didn’t return a phone call seeking comment on the review’s progress.

The Nevada attorney general’s office would only say that the proposal is still under the agency’s review.

Review-Journal reporter Adrienne Packer contributed to this report. Contact reporter Jennifer Robison at jrobison@reviewjournal.com or (702) 380-4512.