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Elevance Health, Inc. on Jan.
23 announced a deal to acquire Blue Cross and Blue Shield of Louisiana,
breaking what one analyst called a nearly two-decade “ice age” in which no
major consolidation among Blues took place. Experts say it’s unclear whether
the tie-up is a harbinger of a flurry of similar dealmaking, but they suggest
that the time may be right to see additional mergers and acquisitions
(M&A) among Blues affiliates.
Could Blue dealmaking
suddenly become red hot?
- “It has been a
long drought” since Blues plans conducted major M&A, observes Ashraf
Shehata, national sector lead for health care and life sciences at KPMG.
And during that time, the country’s largest health plans have gotten
larger and more diversified. “So I think…it’s probably time for the
industry, especially on the Blue side, to consolidate a bit more,”
Shehata tells AIS Health.
- Jefferies
analyst David Windley in a recent research note wondered whether
Blue Cross Blue Shield consolidation will be “making a comeback.” This
deal, he wrote, breaks an approximately 17-year “ice age of Blue
consolidation deals, dating back to Wellpoint for Empire in late 2005.”
- Windley further
noted that Elevance, through its Healthy Blue brand, has joint ventures
in North Carolina and South Carolina that mirror its partnership in
Louisiana. “Could those relationships lead to transactions as well? We’d
hesitate to call timing or likelihood on those, but the seeds are
there,” he wrote.
- Shehata, a
former WellPoint and Anthem executive, suggests that Blue Cross and Blue
Shield of Louisiana is not alone in seeing the wisdom of having a
powerful parent company.
- “Many of them
are going through major upgrades in their claims infrastructure, their
customer support systems, call centers…we’ve seen this wave of
back-office modernization, and that takes capital intensity,” he says.
“I can’t imagine every Blue plan going through that same capital
expenditure if there’s a way to get some economies of scale across the
country.”
Transaction could boost
Carelon, too
- For the
Louisiana Blues plan, one major advantage of the deal will be gaining
access to the capabilities being developed by Elevance’s health care
services arm, Carelon, including “behavioral health, complex and chronic
care programs, and innovative digital models,” according to a press
release announcing the transaction.
- Elevance, for
its part, stands to gain more than just market share in Louisiana. As
Windley points out, the company has been clear about its desire to sell
various services to insurers in addition to administering insurance
policies.
- “Under Pete
Haytaian’s leadership, Carelon is pushing to provide ancillary services
to third party plans, as well as intercompany to Anthem plans under the
Elevance umbrella. In particular, the push is to sister Blues plans,”
Windley wrote. Elevance “should be able to embed most/all [its
solutions] in BCBSLA’s plans over time, driving more unregulated profit
to the enterprise.”
- The acquisition
is expected to close later this year, according to the companies, and is
“subject to customary closing conditions and receipt of certain required
approvals.” Financial terms of the transaction were not disclosed.
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