Health Column



BEN SULLIVAN Staff Reporter

With Valentine’s Day just around the corner, three long-awaited health care mergers are teetering on the verge of conjugal bliss or at least fatter gross revenues.

While two of the unions are in the bag, or nearly so, the ongoing saga of the proposed FHP International Corp.-PacifiCare Health Systems Inc. union drags on.

The California Department of Corporations held public hearings last week in which PacifiCare took it on the chin from consumer advocates and physicians who urged the department to deny approval.

PacifiCare’s HMO, PacifiCare of California, has more than 1 million enrollees in Southern California, making it the second-largest HMO serving Los Angeles County. FHP’s HMO has about half that number locally, making it the fifth-largest serving L.A.

At the hearings, Los Angeles-based political lobbying group Consumers for Quality Care attacked PacifiCare for discouraging its physicians from prescribing Prozac, a popular anti-depressant drug, and Risperdol, a drug for treating schizophrenia.

Critics charge PacifiCare is simply trying to cut costs by offering cheaper medicines. For schizophrenia, the HMO offers Haldol, which costs about $2.50 for a month’s supply. Risperdol, by comparison, runs about $240 for a similar period, but is endorsed by the American Psychiatric Association for treatment of the disease.

“PacifiCare’s (approved drug list) limits the remedies in the psychiatrist’s arsenal to substandard medical choices,” complained Consumers for Quality Care’s Harvey Rosenfield, who also led the failed campaign last year for Proposition 216. That failed proposition would have increased government regulation of the managed care industry.

PacifiCare officials counter that by passing cost savings on to the enrollees, patients can afford longer treatment. The company also said it usually approves requests by physicians who specifically want to prescribe patients Prozac.

Also challenging the PacifiCare deal at the hearings was Juan Cobo, a member of the California Medical Association’s board of trustees and president of the Orange County Medical Association. Cobo questioned the merger’s benefits to patients, particularly Medicare recipients.

Under the proposed deal, the FHP-PacifiCare entity would be the largest Medicare provider in Orange County and among the top three in L.A. County.

Hoping that other HMOs will enter the market and counterbalance the FHP-PacifiCare dominance in Medicare is foolhardy, Cobo said. If anything, the trend in recent years is for competitors to expand into regions by acquiring local players, not by setting up such operations from scratch.

The only remaining HMO with a strong Medicare presence in Orange County is Kaiser Permanente, Cobo said. “(And) who would acquire this not-for-profit entity and compete with the PacifiCare/FHP entity?”

The Federal Trade Commission approved the merger last year, finding it did not create a Medicare monopoly in the region.

On a less contentious note, shareholders are scheduled to vote next week on the proposed merger of managed care giants Health Systems International Inc. and Foundation Health Corp.

The suturing, which has already received FTC and Securities and Exchange Commission approval, would create the nation’s fourth-largest publicly traded managed care company.

Both Woodland Hills-based HSI and Rancho Cordova-based FHC had more than $3 billion in revenues last year, and together would represent roughly 5 million enrollees. Shareholders are expected to overwhelmingly approve the merger.

Finally, shareholders of OrNda HealthCorp and Tenet Healthcare Corp. approved the merger of those two companies last week in separate meetings held in Santa Barbara and Nashville, Tenn. Under the arrangement, OrNda will become a wholly owned subsidiary of the Santa Barbara-based Tenet.

Both companies specialize in hospital ownership. Together they represent $9 billion in pro forma 1996 revenues, with 127 acute-care hospitals in 22 states. In Los Angeles County, the two control 23 hospitals, including Centinela Hospital Medical Center in Inglewood, Brotman Medical Center in Culver City and the University of Southern California University Hospital in Los Angeles.

Nine lives

Former California Assemblyman Richard Katz, D-Sylmar, who last week was appointed to the California Medical Commission, said he will use his new state job to help ease L.A.’s health care woes.

“My role is watching taxpayer dollars to make sure they’re spent appropriately, but also to see people who need care in L.A. County get it,” Katz said.

Katz led the state’s lower house in Sacramento last year, and played a key role in Democrats regaining control of the Assembly in last November’s elections. Katz was forced from his Assembly job by term limits.

The California Medical Commission is an independent state body that negotiates Medi-Cal contracts with hospitals. Katz, who will hold the new post for four years, acknowledged that he has limited experience in health care, but Assembly Speaker Cruz Bustamante, D-Fresno, apparently believes the former assemblyman’s 16 years in Sacramento will prove a service to the commission.

Katz said his work in last year’s L.A. County health care crisis, and legislation he drafted on providing drugs to AIDS patients, have at least given him a primer in the field.

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