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HEALTH PLANS: UnitedHealth to buy Oxford for $4.9 Bln

So three days after Wellchoice (the Old Empire BCBS) decides that it won’t buy Oxford Health plans, a bigger fish steps in. UnitedHealth decided to buy it instead for $4.9 Bln, which is roughly the price Wellchoice had agreed to pay. In some ways this make more sense and in some ways it makes less, and it reflects how the game has changed for health plans . Oxford gives United greater presence in the north-east and it gives it greater access to the Medicare HMO market, which was Oxford’s original strength. Now that the PDIMA Act is funneling more money to Medicare plans, it makes sense for United to want to grab its share. However, back in the day (i.e. before 2001) the goal of managed care plans was regional market concetration, so that they could grind local providers down on price by developing what Ian Morrison used to call “virtual single payer” capability in each market. It looked like Wellchoice was still going that route when it decided to buy Oxford , but decided that it was about to adopt a 90s strategy in a Zero’s world, and thought better of it. This encouraged analysts at Bank of America who gave Oxford a sell rating, based on its likely poor profit outlook. They won’t look quite so smart today to any of their clients who took them up on their advice!

As an aside. It’s good to see that the sanctity of Wall Street remains inviolate. Reuters reported at 4.11pm that United was going to buy Oxford, but looking at the day’s chart, you figure that the word got out about 40 minutes earlier! I wonder how that was possible?

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