Monday, March 12, 2007

United Health Buys Sierra Health Plans--The Consolidation Begins Again--But What's the End Game?

After a period of quiet on the merger and acquisition front, it seems to be beginning again.

Today, UnitedHealth announced an agreement to acquire Sierra Health Plans for $2.4 billion.

With little in the way of growth in the commercial health insurance markets, and the recent surge in Medicare products about to settle down as the new Medicare Part D and Medicare Advantage opportunities reach a plateau, the only way a big health plan can grow is acquisition.

Wall Street wants earnings growth and the acquisition game does it again and again for them.

But where is the real value? If health plans can increase their earnings only by buying the next guy, what’s the end game?

Real value can be accomplished by better managing the $2 trillion health care economy that is now up to 16% of GDP. That is also the kind of value that would secure a place for the private sector in America’s health care system.

We are already hearing that Wellpoint is back in the acquisition saddle as well.

Who's next?
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