September 14, 1996 in Nation/World

Group Health Discusses Merger With Giant Hmo Joining With Kaiser Permanente Wouldn’t Affect Care, Officials Say

By The Spokesman-Review
 

Group Health Northwest would become part of the nation’s largest health-maintenance organization if talks disclosed Friday lead to a merger with Kaiser Permanente.

But officials said a consolidation, should one occur, would not affect the care received by Group Health members.

They said a merger would cut administrative costs, generate more money to upgrade services and help attract major employers who want health coverage from providers that operate regionally or nationally.

Group Health Northwest President Henry Berman said one-third of the patients served by the HMO work for companies not based in the area.

As those companies cut costs by narrowing employee health care options, small plans like Group Health might get pushed out of the bidding, he said.

“We’re sure that Kaiser will always be a player,” Berman said.

Group Health is Eastern Washington’s largest HMO and serves patients from Yakima to North Idaho.

The Spokane-based company is an affiliate of Group Health Cooperative of Puget Sound, which is holding the talks with Kaiser Permanente’s Northwest division.

Phil Nudelman, president of the cooperative, said the Spokane affiliate recently lost its contract with Safeway because its territorial coverage was not broad enough.

But Safeway has a contract with Kaiser Northwest. Safeway and Kaiser are both based in Oakland, Calif.

Kaiser has 7.4 million members in 17 states and the District of Columbia. Its Northwest division covers 400,000 enrollees, most in the Portland area.

The organization grew with the help of Henry Kaiser, who also created the forerunner of Kaiser Aluminum Corp.

Group Health Cooperative, including Group Health Northwest, provides care to 650,000. Of that number, only 40,000 are members of the cooperative who have the right to vote on a merger.

None of the members are in Eastern Washington. But Nudelman said two members of Group Health Northwest’s board, Chairman Dodie Ruzicki and vice Chairman Bill Saraceno, will participate in the merger discussions.

Berman said Kaiser officials have been impressed by the relationships Group Health Northwest has built with Inland Northwest communities, and would like to apply those lessons elsewhere in its system.

Group Health employs 900 in Eastern Washington, 750 of those in Spokane. It serves 167,000 patients. The HMO has been affiliated with the Seattle-based cooperative since 1977.

Both Group Health Northwest and Kaiser’s Northwest division got good marks from the National Committee for Quality Assurance, an independent firm that rates managed-care companies.

Intense competition for new accounts has forced Group Health to restrain premiums and implement tight cost controls.

Group Health as a whole lost $11 million last year. The cooperative will not lose money this year, Nudelman said, but revenues will not provide the money needed to upgrade operations, particularly computer systems.

Although the talks could lead to a marketing agreement or some other arrangement short of a merger, the head of Kaiser’s Northwest division indicated consolidation was more likely.

“There’s a limit to what can be done with operating agreements,” said Mike Katcher.

He said Kaiser and Group Health share a focus on research, consumer involvement and sponsorship of community activities.

Nudelman said the organizations are so similar, they act like twins separated at birth.

“Kaiser is not the white knight, but it is the right knight,” he said.

Results of the negotiations probably will go to directors of the companies in about two months, with a decision unlikely before early next year. The chart

Group Health Northwest provides health care to 167,000 people from Yakima to Coeur d’Alene. It’s been an affiliate of Group Health Cooperative of Puget Sound since 1977.

Kaiser Permanente, the nation’s largest health-maintenance organization, has 7.4 million members in 17 states and the District of Columbia. Its Northwest division covers 400,000 enrollees, mostly in the Portland area.

, DataTimes

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