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A for-profit CareFirst might be acquired


CareFirst BlueCross BlueShield is getting closer to filing for conversion to for-profit status, with a possibility that the conversion will include being acquired, House Speaker Casper R. Taylor said yesterday.

The three companies considered by analysts to be the most likely potential acquirers - WellPoint Health Networks Inc., Trigon Healthcare Inc. and Anthem Inc. - declined to say whether they're talking with CareFirst, but all said they are interested in growth.

"Everybody in this industry is talking to everybody," said Brooke Taylor, vice president for corporate communications for Trigon, which operates the Blue Cross plan in Virginia. She said Trigon is following a "regional strategy" that calls for growth in the mid-Atlantic and Southeast.

David Shove, an analyst for Prudential Securities who follows Trigon and WellPoint, said, "Trigon makes sense because of geography, and because they have money to spend."

Trigon recently tried to buy the Georgia Blues plan, but was outbid by WellPoint.

Shore said WellPoint, which operates California Blue Cross, doesn't have the geographical logic of Trigon, but "has been on a tear buying things."

Besides Trigon and WellPoint, there is one other publicly traded Blues plan, RightCHOICE Managed Care Inc. of Missouri, but Shove said, "RightCHOICE doesn't work because the balance sheet isn't big enough."

Anthem, based in Indiana, has Blues plans in eight states. However, Anthem is planning a conversion from mutual to for-profit status, which could complicate any effort to do a deal with CareFirst, said Douglas B. Sherlock, senior analyst at the Sherlock Co., an investment advisory firm in Gwynedd, Pa.

Lauren Green-Caldwell, a spokeswoman for Anthem, said that she could not comment on CareFirst, but that even with the pending demutualization, "partnering has been a part of our past, and we would look at whatever options there might be."

Jeffery Valentine, a spokesman for CareFirst, said, "As a matter of corporate policy, we can't comment on speculation or rumors concerning our future plans."

Based in Owings Mills, the nonprofit CareFirst operates the Blue Cross plans in Maryland, the District of Columbia, Northern Virginia and Delaware.

"Their language to me is that they are very close, but they've never defined what 'very close' means," Taylor said. He said that, based on "educated hearsay," he expected a conversion plan to be filed within three months and that being acquired would be "a logical way to convert."

Nationally, Blue Cross plans have been seeking to merge and, in some cases, convert to for-profit status to compete with commercial insurers.

The Baltimore Business Journal reported yesterday, citing unidentified sources, that CareFirst was close to a deal with WellPoint.

T. Michael Preston, executive director of the state medical society, said he had heard talk that CareFirst would become "WellPoint East" but "it's all rumor."

Any CareFirst conversion plan would have to be filed with Maryland's insurance commissioner, as well as with regulators in the other states. Steven B. Larsen, the Maryland commissioner, would then review the plan and hold hearings to see if the conversion is in the public interest.

He said the review process probably would take six to nine months.

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