Kaiser Permanente Ohio is getting a new name, a potential new network of preferred hospitals and a new plan for profitability when it gets a new owner as soon as this month.
Catholic Health Partners (CHP) is awaiting final approval from the Ohio Department of Insurance for a previously announced deal to acquire the financially troubled Northeast Ohio segment of Kaiser Permanente’s insurance business and affiliated physician practice.
The deal is tentatively scheduled to close by Sept. 30.
No money initially will change hands under the sales agreement, which calls for Kaiser Permanente to keep $35 million in operating cash with the Ohio business after the sale to CHP is complete, according to filings with the state insurance department obtained by the Akron Beacon Journal.
Five years later, Cincinnati-based Catholic Health Partners will pay Kaiser Permanente Ohio’s parent company, Kaiser Foundation Health Plan Inc., $50 million to $100 million, according to the filings. The payment will be based on the acquired insurer’s financial performance during the five-year time period after the sale.
The deal comes as Kaiser Permamente Ohio continues to post millions in losses, including a $59.6 million deficit in 2012.
With more than $2 billion in cash and investments available, the financially strong Catholic health system doesn’t plan to take on any debt to finance the Kaiser Permanente purchase, according to its filings with the Ohio Department of Insurance.
“Part of the purchase price is also contingent upon future financial performance which limits the risk of ongoing funding,” CHP said in the filings.
When the deal is complete, Kaiser Permanente’s Ohio business will officially change its name and become part of HealthSpan, Catholic Health Partners’ insurance arm with more than 100,000 members.
“HealthSpan will honor all of its contracts with members and employees,” HealthSpan Chief Operating Officer Dan Hounchell said in an email through a CHP spokesperson.
Initially, at least, “there are no changes in the health-care plan or plans, the proposed providers, procedures for accessing care and the form of all proposed and existing contracts related to the administration, delivery and financing of health-care services,” CHP stated in its filings.
But after CHP reviews the “competitiveness and viability” of Kaiser’s existing plans and network of health-care providers, “it may seek changes in those areas,” according to the filings.
Under the deal, Kaiser Permanente Ohio’s “health-care services agreement” with the Cleveland Clinic can be terminated when the insurer is sold. However, a Kaiser Permanente spokesman said the insurer is opting not to end that contract at the close of the deal.
A Cleveland Clinic spokeswoman said last week the hospital’s ongoing relationship with the insurer “is still under discussion.”
CHP indicated in state filings it is evaluating the hospital network for Kaiser Permanente Ohio members “to ensure the most cost-efficient, high-value network is in place and member access and affordability are maintained.”
Managed-care insurers typically require patients to seek services from in-network hospitals and doctors for care to be covered with the lowest out-of-pocket costs for consumers.
The physician network for Kaiser Permanente’s Northeast Ohio patients will remain the same after the deal because CHP has reached contract agreements with more than 95 percent of those doctors, according to the health system. “This should result in little or no disruption to members.”
After the sale, Kaiser Permanente Ohio’s workers will become HealthSpan employees with health-insurance benefits that conform to Catholic religious directives for health-care services “by excluding procedures such as abortions, contraceptives, certain fertility treatments … sexual conversion and sterilization,” according the agreement.
When asked whether consumers enrolled in Kaiser Permanente Ohio insurance plans will have similar benefit limits after the sale, Hounchell responded through a CHP spokeswoman: “We are committed to complying with federal and state laws in a manner that is compliant with the Ethical and Religious Directives of the Catholic Church. We cannot comment on specifics of the transaction, given that we haven’t closed and in many cases are bound by confidentiality agreements.”
According to its filings with the state, Catholic Health Partners “will work with existing customers of the health plan to help ensure all rates and product offerings currently in place and/or those agreed to for the 2014 year will remain unchanged.”
Kellie Copeland, executive director of NARAL Pro-Choice Ohio, said she questions whether women’s access to reproductive health will be limited.
“I think this is part of a troubling trend of being corporations and religious entities and all these mergers trying to interfere with personal, private health care,” she said. “It gives me a lot of concern, because reproductive health care is health care.”
Other changes likely are in store as Catholic Health Partners seeks to turn around the insurer’s finances.
CHP plans “staff reductions, implementation of cost-competitive benefit offerings for employees, the consolidation to back office functions and a more diversified product offering” to achieve profitability within three years, according to reports filed with the state.
CHP expects to reduce full-time equivalent positions within the former Kaiser Permanente system in Northeast Ohio by 30 percent, in addition to 365 FTEs already cut by Kaiser this year, according to the filings.
With the moves, the number of FTEs within Kaiser Permanente Ohio is expected to drop from 1,628 in 2012 to 817 by 2015.
Catholic Health Partners also is finalizing another unrelated deal to acquire a minority ownership stake in Summa Health System. Officials have said Summa will remain independent and not become a Catholic hospital.
Cheryl Powell can be reached at 330-996-3902 or firstname.lastname@example.org.