California regulatory actions shadow United's pursuit of Sierra

In light of California regulators' smackdown of UnitedHealth Group over how the insurer handled its PacifiCare acquisition in that state, medical, governmental and union officials appeared together to renew their call that regulators reject the company's $2.6 billion bid to acquire Sierra Health Services in Nevada.

At a news conference in Las Vegas Feb. 7, AMA's Immediate Past President William G. Plested III, MD, warned that if UnitedHealth Group's bid to merge with Sierra goes through, physicians and patients in Nevada would face the same kind of mismanagement that has plagued PacifiCare's members and doctors in California, where he is a surgeon.

"It is overwhelmingly clear that United's behavior reflects an underlying philosophy that it is more cost-effective to violate state law and risk a possible fine than to comply with laws designed to protect patients and employers," he said.

Others at the news conference included Clark County (Nevada) Commission Chair Rory Reid, Nevada State Assembly Speaker Barbara Buckley, Nevada State Medical Assn. Executive Director Larry Matheis and, representing the Service Employees International Union, nurse Fredo Serrano.

Prompted by the recent allegations in California against United's subsidiary PacifiCare, which merged with United in 2005, Reid joined others in pleading with regulators to "learn from history" and reject a proposed deal, announced in March 2007, to merge United and Las Vegas-based Sierra.

The news conference occurred about a week after California's Dept. of Managed Health Care fined United $3.5 million, and the state's Dept. of Insurance accused the company of 133,000 violations of state law and regulations, ranging from failure to pay doctors on time to failing to tell members how to appeal claims decisions. The Dept. of Insurance could fine United up to $1.3 billion.

The company has admitted to problems in integrating its PacifiCare purchase. It said most of the violations were minor administrative errors that had little effect on reimbursement, and that it had already begun to address the problems. United spokesman Tyler Mason said those errors won't be repeated in Nevada.

But Dr. Plested, who practices in Santa Monica, Calif., said "it is entirely predictable that patients, physicians and employers in Nevada will experience United's willful and deliberate mismanagement if the giant insurer is allowed to consolidate overwhelming market power through the acquisition of Sierra."

He and others at the news conference said United would control 80% of Nevada's and 94% of Clark County's HMO market in if the deal goes through.

Mason said although it is true that United and Sierra together could dominate one sector of the insurance market -- Medicare Advantage HMO products -- he noted that no one has to enroll in that plan, and two other companies entered the market in January. The overall insurance market penetration after the deal would be about 30 %, he said.

The Nevada Division of Insurance in August 2007 issued a conditional approval for the United-Sierra deal. The California Dept. of Insurance in September 2007 gave its go-ahead.

Mason said United was in "advanced discussions" with the U.S. Dept. of Justice, the last entity required to sign off on the deal.

Dr. Plested said he was hoping regulators in Nevada would at least be able to stall the deal long enough to push past the expiration of the insurance commissioner's conditional approval. The Nevada approval would expire if the deal does not close by Feb. 29.

Nevada's governor also is speaking out against the merger, and the state attorney general's spokeswoman told local media that it's possible that office and the Justice Dept. could file a lawsuit before the deadline in order to block the deal.

The Deal, a financial publication, also reported on Feb. 8 that Wall Street trading patterns show that the stock market believes there is an increasing risk of the United-Sierra deal not going through, or being approved with conditions that United divest some business. United has to pay Sierra $25 million if the deal does not close by March 11 because of antitrust concerns.