Blue Cross and Blue Shield of Maryland has selected a Lutherville company to manage its real estate requirements, a move the state's largest health insurer expects will save $2 million annually.
The selection of MacKenzie/O'Conor, Piper & Flynn Commercial Real Estate Services ends a three-month search by Blue Cross, and is part of a larger effort to become more competitive by trimming $162 million a year in administrative costs.
"They were chosen because of their breadth of experience, their specific experience in the field of health care and because of their depth of knowledge about local real estate," said Patricia A. Sullivan, Blue Cross' director of corporate services.
In addition to real estate, Blue Cross has slashed its payroll, streamlined marketing and held down subscribers' medical costs in an effort to manage costs. In 1994, Blue Cross reported operating profits of $60 million, a 40 percent gain from the year before. As part of MacKenzie/O'Conor's two-year contract, the firm is expected to provide management for all of Blue Cross' leased and owned facilities, renegotiate expiring leases, assist in the consolidation and sale of certain buildings and possibly construct new facilities.
Blue Cross and subsidiaries such as CFS Health Group and the Columbia Medical Plan spend about $17 million annually on real estate occupancy costs, maintaining offices in 47 locations throughout the state totaling 1.2 million square feet -- equivalent to all the leasable office space in Harford County.
Blue Cross also is grappling with 133,000 square feet of excess office and other space, partly the result of recent employee downsizing. In the past six months, Blue Cross has announced it will eliminate 600 employees from its payroll.
"We know the issues that health care insurers and providers face, and our development background I think was very helpful," said Robert J. Aumiller, a MacKenzie/O'Conor executive vice president. "I expect our work will be a bundling of all types of real estate services."
MacKenzie/O'Conor was formed in October 1992, the result of a marriage between developer MacKenzie & Associates Inc. and the commercial realty division of O'Conor, Piper & Flynn Realtors. Last year, the firm participated in transactions valued at $137 million, a 30 percent increase from the previous year. In addition, MacKenzie in the mid-1980s developed numerous medical-related projects, including the $50 million McDonogh Crossroads office park in Owings Mills.