News in brief - Nov. 8, 2004

Coventry buys First Health - Select Medical goes private - Quest boosts stake in QMed - "Personalized medicine" group forms - Groups receive performance bonuses

Coventry buys First Health

Bethesda, Md.-based Coventry Health Care announced in October that it planned to purchase Illinois-based First Health Group. It's a move expected to provide Coventry with a long-sought opportunity to win more commercial and government contracts across the nation as an administrative services vendor.

The deal is valued at $1.8 billion in cash and stock.

First Health, based in Downers Grove, Ill., is focused on providing administrative services including PPO network coordination to large, self-insured employer groups, workers' compensation and state government agencies. It operates in every state.

First Health will become a subsidiary of Coventry. The deal, subject to regulatory approvals and the agreement of First Health shareholders, is expected to close in the first quarter of 2005, Coventry said.

Select Medical goes private

Hospital operator Select Medical Corp. has reached an agreement to be acquired by a new company formed by an investment group in a deal valued at about $2.3 billion.

Under the agreement, Select Medical would become a privately held company and wholly owned subsidiary of EGL Holding Co., which was formed by an investment group led by the private equity investment firm Welsh, Carson, Anderson & Stowe. Select Medical shareholders not participating in the buyout would be offered $18 per share in cash, which is about 36% above the stock's recent average closing price of $13.28 per share.

Select, which operates 83 long-term acute care hospitals in 25 states along with scores of outpatient rehabilitation clinics, said it would continue to be run by its current management team and would remain headquartered in Mechanicsburg, Pa.

The deal is subject to stockholder approval and other conditions. It is expected to be completed in the first quarter of 2005.

Quest boosts stake in QMed

Quest Diagnostics Inc. has invested $2 million in QMed Inc., raising its ownership position in the Eatontown, N.J., disease management company to 4%. Teterboro, N.J.-based Quest sells diagnostic testing services.

"Personalized medicine" group forms

More than 20 entities, including pharmaceutical, biotechnology and information technology companies, have formed a nonprofit group to foster greater understanding and adoption of "personalized medicine."

Personalized medicine involves the use of new methods of molecular analysis to better manage a patient's disease or predisposition towards it, according to a news release. Charter members of the Personalized Medicine Coalition in Washington, D.C., include Abbot Laboratories, AstraZeneca, IBM Life Sciences and Siemens.

Groups receive performance bonuses

California physician groups participating in the Integrated Healthcare Assn.'s "Pay for Performance" program earned about $50 million in bonuses for their work in the first year of the program.

The program, which includes six of the state's largest health plans and 45,000 physicians, focuses on quality care for a common set of measurements, making it easier for groups to participate. It also rewards groups based on patient satisfaction and their investments in information technology.

The program had an impact on some clinical measures as well. Between 2002, when "Pay for Performance" was first tested, and 2003, the first year it was implemented, data shows nearly 150,000 more women received cervical cancer screenings, while 35,000 more women underwent a breast cancer screening, according to the IHA.