County mulls merger fight

By Marshall Allen

Friday, Dec. 28, 2007 | 7:16 a.m.

The Clark County Commission already opposes a monumental merger of health insurance companies, but now it will discuss litigation to block it.

An item on the Tuesday commission meeting agenda would authorize, if necessary, a lawsuit to derail UnitedHealth Group's proposed takeover of Sierra Health Services. Commission Chairman Rory Reid said the county is concerned about how the merger would affect payments to University Medical Center, the county-run hospital.

The proposed $2.6 billion deal is awaiting the approval of the Justice Department, which is investigating it for potential violations of antitrust laws. The Nevada Attorney General's Office may intervene for the same reasons.

Reid said it is time to talk about the possibility of suing to prevent the merger, in case regulators don't act to make the deal acceptable to the county.

"If this merger is going to make it more difficult to operate UMC, then we need to be in the position to protect the county's interests," Reid said.

A county official familiar with the situation said it's estimated that United's takeover of Sierra would cost UMC millions of dollars a year. Kathy Silver, UMC's interim CEO, said that when United took over PacifiCare two years ago it complicated the claims payment process, which increased the cost of administration and cut off cash flow.

United spokesman Tyler Mason says some "initial glitches" in converging the two systems interrupted payments, but that this time the process won't change.

That's what United officials promised when they took over PacifiCare, Silver said.

"Nobody can foretell the future with any certainty, but if the PacifiCare acquisition is an example it gives us cause for concern," Silver said.

Sierra is the state's largest health insurance provider, covering about 630,000 people, most of them in Clark County. United, which has a string of regulatory violations and fines in other states, is the nation's largest health insurer, providing coverage for about 70 million Americans.

Critics claim the merger would give United an enormous market share and unprecedented power to raise rates on consumers and lower payments to doctors and hospitals. No one will be able to oppose United because it will control so much of the market, the critics say.

The companies claim the merger will provide consumers with access to a national network of doctors as well as technology advances that will bolster the health care infrastructure.

Mason, the United spokesman, said representatives from his company and Sierra have reached out to Clark County officials to allay concerns. Mason said there are no plans to change how Sierra operates because the model works so well in Clark County.

All parties are waiting to see what actions are taken by the Justice Department and the Attorney General's Office. Officials from the two health insurers initially said they would have the approval by the end of 2007, but now say it could be pushed to January.

The Justice Department can approve the merger outright, demand that the companies sell off some of their share of the market, or, in the most extreme and unlikely scenario, sue to block it.

Because the deal was announced in March and is taking longer than expected to be approved, antitrust experts say it's likely the Justice Department will not merely green-light the deal. More likely, they say, United will have to sell off some of its customer base to other companies.

Once the Justice Department signs off, the takeover could close in a matter of hours, said a Washington, D.C., antitrust attorney who is following the merger on behalf of investors.

Thus, the Clark County Commission's decision to authorize a lawsuit would be a preliminary step so it can act fast if it is not satisfied with the Justice Department's decision, he said.

A coalition of merger opponents includes the Nevada State Medical Association and Clark County Medical Society, which represent doctors; Clark County; and the Service Employees International Union Local 1107, which represents about 17,500 nurses and county employees.

Antitrust attorney David Balto, the coalition's paid consultant, is named on the agenda as the lawyer who would represent the county if a lawsuit were filed.

The opponents hope the Justice Department will try to block the deal, and that Nevada Attorney General Catherine Cortez Masto will also sue to stop it. Officials from the two agencies have refused to breathe a word about the time line for a decision or give any hint of what actions they might take.

Mason, the United spokesman, also disputed a claim by merger critics reported Wednesday in the Sun. Critics said United's recent acquisition of Fiserv, which administers health plans on behalf of self-insured companies, would give United inside access to rates Fiserv negotiates with doctors and hospitals. But that would be impossible, Mason said, because the United takeover of Fiserv does not include the Nevada division.