Foundation Health Sells Center, Outsources to Purchaser

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Foundation Health Systems Inc., a Woodland Hills, CA-based managed health care company, has sold the assets of its Healthline triage call center, saying that the center did not handle sufficient volume to justify its continued operation by the company. Foundation Health Systems will continue to offer Healthline services to its members through a service agreement with HBO & Co., the buyer of Healthline's assets.


"We determined that we did not have the necessary scale to be cost-effective in the call center business," said Jay M. Gellert, president and chief executive of Foundation Health, which launched Healthline in 1996.


HBO & Co., Atlanta, a provider of technology services for the health care industry, paid $38 million in cash for the Healthline assets, consisting primarily of a database of protocols nurses follow when patients call to receive medical advice. In addition to these protocols, nurses have access to the clinical history of patients enrolled in Foundation Health's health plans. HBO & Co. did not acquire the Philadelphia office that housed Healthline's call center, nor did it absorb any of Healthline's employees.


HBO & Co. already operates its own triage call center division, called Access Health Center, which has a staff of 500 nurses at seven regional centers and has annual revenues of about $175 million, derived from other health care providers who outsource their call center services.


In conjunction with the acquisition, HBO & Co. entered a 10-year agreement which calls for Access to provide call center services to Foundation Health plan members who had been served by Healthline. The addition of Healthline's patient base will add an estimated $15 million to $20 million in annual revenues, according to Monika Brown, HBO's director of investor relations. The company will receive revenues from Foundation Health in the form of a fixed fee and a monthly per-patient fee.


In addition to handling the inbound calls of Foundation Health plan members, Access will manage an extensive outbound calling program in which nurses make follow-up calls and contact members with chronic diseases. During December, Healthline's full-time staff of 65 nurses handled about 19,000 inbound calls and made approximately 67,000 outbound calls, according to Lisa Haines, a spokeswoman for Foundation Health.


Foundation Health's patients will perceive few changes in services as a result of the acquisition, according to both companies.


"Access is a well-known, well-respected call center, and we feel comfortable with the services they provide," Haines said. "They do the same types of clinical triage."


Access already had been providing similar services for about 2 million of Foundation Health's members currently covered by Foundation Health's government contracts division. This latest acquisition and services agreement give it another 4 million Foundation Health members.


Foundation Health, the nation's fourth largest publicly traded managed health care company, had been reviewing its assets for the past year to determine which operations it would keep and which it would divest.


Triage call centers are "an essential part of a managed care organization, but they are not part of the main-line business," said Dallas Salisbury, president and chief executive of the Employee Benefits Research Institute, Washington. "What [Foundation Health] decided is that they should stick to the business of providing health care, and let those companies who have sufficient economies of scale to run call centers run the call centers."


Some of the dominant players in managed care can afford to operate their own telephone-based triage facilities, he said, but small or mid-sized companies such as Foundation Health cannot achieve the economies of scale necessary to run such operations efficiently.


Triage call centers are designed to cut medical costs by reducing the number of unnecessary visits to doctors, but they also can provide a valuable service to members of health plans, Salisbury said. n
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