Coventry to acquire UnitedHealth Group

Industry sources informed MCM late today that, in a stunning move, Coventry Healthcare agreed to acquire health plan giant UnitedHealth Group. For several days there had been rumors that UHG would snap up Coventry, the troubled mid-tier health plan, but events of the last few days led to grave concern at UHG that the Ingenix database problems might bring down the parent company. Reportedly the board felt it had ‘little choice but to get what we can while we can’.
The deal was done over the last two days, evidently triggered by the appearance of UHG CEO Steve Hemsley before Sen Jay Rockefeller’s Senate Committee. Hemsley and Ingenix CEO Mike Slavitt were ‘hammered’ by Rockefeller and his fellow Senators, who were particularly incensed at the health plan execs inability or unwillingness to “acknowledge consumers’ concerns about whether they were being shortchanged.”
The hearing was quite contentious, but there was at least one light moment. At one point, responding to a Senator’s pointed questioning about UHG’s conflict of interest, Slavitt said “”There is an important difference between an inherent conflict and the actual practice of bias–the latter is something neither I nor my employees nor our parent company would ever tolerate…” Senator Rockefeller reportedly whispered to a colleague “huh? that guy talks like a politician…”
Sources indicate Hemsley called old friend and colleague, current Coventry CEO Allen Wise, to commiserate shortly after he and Slavitt left the Senate hearing room while they were en route to National Airport. “I don’t want to be AIG’ed”, Hemsley reportedly told Wise; “I can’t believe there’s all this fuss over a lousy few hundred million bucks…I just want to run my company and be left alone, and now this McCaskill woman says she’s going to be on me like white on rice…”
Wise had thought he was close to a deal with his old employer to sell Coventry for a slight premium over the current stock price (around $13). Instead, Hemsley told him he and the UHG board had decided to get out of the health plan business, and were going to sell the company as quickly as possible. A deal came together very quickly, with overall terms agreed to before Hemsley and Slavitt boarded their flight for a return to MInneapolis. (terms were not disclosed)
One of the key motivators for UHG was the concern on the part of UHG’s board and Hemsley that they would be back in front of Rockefeller et al repeatedly, and would be ‘the poster child for bad health plans’. The Senator had concluded the hearing by telling Hemsley and Slavitt that he was going to order the GAO to determine if and how Ingenix’ database had been used to shortchange federal employees who had accessed out of network providers.
Slavitt was reportedly quite shaken by the dressing-down during the hearing, and was ‘close to tears’ as he exited the chamber. Hemsley was seen to be comforting Slavitt, patting him on the shoulder and murmuring “now, now, it will all be all right” as they walked towards their waiting limo.
When reached for comment, Hemsley refused to confirm or deny the deal, although he did say “I actually had to fly commersh to DC; do you have any idea what a hassle that is?” Hemsley was referring to the Board’s command that he not use one of UHG’s fleet of corporate jets, and instead fly Northwest to attend the hearing. (On a side note, Hemsley reportedly said “Northwest… isn’t DC southeast of here?”)