Sierra expands again with purchase of Mutual of Omaha’s Nevada operation

Wednesday, Oct. 28, 1998 | 12:15 p.m.

Nevada's largest health maintenance organization is acquiring three subsidiaries of Mutual of Omaha Insurance Co.

Las Vegas-based Sierra Health Services Inc. signed an agreement Tuesday to buy the Nevada health care business of Exclusive Healthcare Inc., United of Omaha Life Insurance Co. and United World Life Insurance Co., all Mutual of Omaha subsidiaries.

The deal is expected to close by Dec. 31 and the purchase price is dependent on the number of members Sierra retains, with a flat fee for every member that stays with the plan. Because contract renewal negotiations are ongoing, it may be two years before the final purchase price is determined, but a spokeswoman said the total "would be in the single-digit millions."

The state Department of Insurance and the Federal Trade Commission must review the deal before it is approved.

Mutual of Omaha is notifying its 26,000 HMO customers in six Nevada counties of changes in coverage. Sierra said many of the 1,100 doctors with whom it contracts also provide care in Mutual of Omaha's Exclusive Healthcare program, meaning most customers would not have to switch doctors.

"But in some cases, customers will have to switch and Mutual of Omaha is assisting those customers," said Ria Carlson, a Sierra spokeswoman.

Carlson said Sierra, whose HMO operates under the brand name Health Plan of Nevada, would offer Mutual of Omaha customers a larger selection of physicians and no lapse in coverage. That means Mutual of Omaha customers will continue to pay at their existing rates until a new contract is negotiated.

Another benefit, she said, is that new customers will be joining a company that has been accredited by the National Committee for Quality Assurance, a non-profit organization dedicated to assessing and reporting on the quality of managed care plans.

Sierra will assume an additional 8,000 members from United of Omaha, a preferred provider organization and indemnity health insurer, and United World, which provides health benefits to small-group customers.

The transaction includes Exclusive Healthcare's individual HMO members, but it does not affect Mutual of Omaha's individual, non-HMO policyholders or employers based in other states that use the preferred provider organization in Nevada.

"This transaction gives us an opportunity to fuel growth in our core market," said Sierra Chairman and Chief Executive Anthony Marlon. "Moreover, the former Exclusive Healthcare members in Las Vegas will be able to utilize Nevada's largest medical group -- Southwest Medical Associates -- and be served by a health plan with NCQA full accreditation."

Earlier this year, Sierra expanded outside of Nevada, acquiring the 123,000-member Kaiser Permanente Southwest Division in Dallas-Fort Worth. The $129 million acquisition, announced in June, complemented Sierra's operation in Houston.

Mutual of Omaha said it sold its Nevada operation because it had not been able to get the number of members it needed to stay competitive. Mutual of Omaha Executive Vice President Steve Booma said knowing Sierra's reputation in the market sealed the deal.