Blue Cross and Blue Shield of Maryland said yesterday that it has sold its most lucrative subsidiary, Green Spring Health Services Inc., for $37.2 million.
The sale, to a partnership of two of the largest Blues plans in the country, will more than double the Maryland plan's reserves.
The sale of Green Spring, which manages mental health and substance abuse care, is consistent with a decision by the Maryland Blues' board of directors to focus on its core business of providing managed health care in the state, said Senior Vice President John A. Picciotto. Green Spring, with 315 employees in seven states, has become a national business, he said.
The Maryland Blues said it would realize a six-fold return on its investment.
Blue Cross had $25 million in reserves, or emergency funds, as of Dec. 31, far below the level recommended in the industry to insure stability and solvency in the event of an unexpected increase in claims.
The new owners of Green Spring are Blue Cross of Western Pennsylvania, one of the nation's 10 largest plans, and Blue Cross and Blue Shield of Illinois. As part of the agreement, the two plans are paying about $3.3 million to the top 20 managers of Green Spring to insure they stay with the company.
Neil Hollander, vice president of Blue Cross of Western Pennsylvania, called the compensation plan a private matter. But he said that as part of the purchase, the buyers "had to do a lot of things to secure those employees, including signing agreements to make sure they are working for Green Spring for a period of time."
Green Spring, an offshoot of the Columbia Medical Plan, opened 1989 and has become one of the five largest mental health care managers in the country, according to Paul G. Shoffeitt, president and chief executive officer of Green Spring.
In addition to reviewing mental health benefits for 5.5 million people in a number of Blues plans, it develops and refers patients to networks of doctors who provide such care. It recorded $45 million in revenues last year.
The company will remain based in Columbia, where it has 190 employees. Its new owners are hoping it will grow to serve more Blues plans around the country.
The $37.2 million sale price is for 80 percent of the Green Spring. The Western Pennsylvania Blues plan bought 20 percent of it in June for $3.4 million after hiring Green Spring for its own subscribers.
"We selected them because they were making sure people got good quality care in the right place as opposed to getting cheap care or stopping people from getting services, which some of the other companies in this business seemed to be doing," said Mr. Hollander of the Western Pennsylvania plan.
The sale also brought the state's largest health insurer into compliance with tougher new requirements laid out for it in an insurance reform bill awaiting the signature of Gov. William Donald Schaefer.