State Approves PacifiCare-FHP Combination

CYPRESS — After a prolonged examination, the state has given PacifiCare Health Systems Inc. the OK to absorb the California operations of former competitor FHP International Corp.

The combined health plan, which will operate as one system, will serve about 2.3 million Californians, Cypress-based PacifiCare said Friday.

But the Department of Corporations, which regulates health maintenance organizations, is requiring PacifiCare to revise some of its contracts with doctors and hospitals to ensure that providers remain in business and consumers will have access to care.

“Our concern is that, in certain circumstances, the [prior] provisions could limit accessibility to providers,” Corporations Commissioner Keith Bishop said Friday.

The previous contracts prevented providers from doing business with other plans, or offering them lower rates, according to the agency.

Nancy Monk, a PacifiCare official involved in months of negotiations with the state, said Friday the company had no problem revising its contracts.

She said some had become outdated anyway, because of changes in the health-care marketplace.

Overall, Monk said, the company is satisfied with the agency’s approval.

“We were able to convince the department that we are taking care of their concerns involving quality of care, continuity of care, and financial stability,” she said.

Consumer groups said they welcomed the agency’s effort to limit troublesome provisions in PacifiCare’s provider contracts. But they said the agency’s restrictions don’t go far enough.

Consumer activist Jamie Court said the agency’s order allows PacifiCare to fudge on its commitments to reduce exclusivity provisions in its contracts. “I see too many ifs, ands and buts,” he said, noting, for instance, that the plan was allowed to maintain an exclusive arrangement with two provider groups.

Consumers also said the state’s order failed to address concerns raised about PacifiCare’s prescription benefits. The agency said it hasn’t completed reviewing terms in PacifiCare’s pharmacy program and might seek additional changes in provider contracts in that area.

Recently, the plan was criticized by activists for senior citizens and the mentally ill over restrictions on drugs commonly prescribed to treat depression, Alzheimer’s, high blood pressure, glaucoma, high cholesterol and allergies.

“The pharmaceutical issue with PacifiCare is a serious problem and it should have been resolved before a green light was given,” said Jeanne Finberg, a Consumers Union attorney.

PacifiCare officials said that while the company has a preferred list of medications, alternatives can be prescribed upon the doctor’s special request.

The state had approved PacifiCare’s acquisition of FHP earlier this year, but would not allow PacifiCare to combine the California operations until the Department of Corporations could evaluate the impact on plan members.