In an attempt to expand its footprint in Missouri and Arkansas, on Wednesday, Coventry Health Care Inc. (CVH) agreed to acquire Mercy Health Plans (“MHP”) and its subsidiaries from Sisters of Mercy Health System for an undisclosed amount. Coventry will also be a long-term provider and customer liaison for Sisters of Mercy Health System and its associates.
 
MHP is a diversified health plan with approximately 90,000 commercial risk members, 60,000 commercial self-funded members, and 30,000 Medicare Advantage Coordinated Care members throughout Missouri and northwest Arkansas. It is a subsidiary of the Sisters of Mercy Health System, the eighth-largest Catholic healthcare system in the U.S.
 
Coventry said the acquisition is expected to be slightly accretive to its 2011 earnings and will serve more than 1.2 million members in its six-state Midwest region, upon the completion of the acquisition. Also, Coventry will absorb the majority of the 420 employees of Mercy Health System.
 
The deal is expected to close in the next three to four months, subject to customary closing conditions and regulatory and other approvals.
 
The acquisition focuses consistently on Coventry’s seven core businesses, and is expected to build its presence in the Midwest and develop its relationship with Sisters of Mercy Health System. In addition, Coventry values and recognizes MHP’s businesses and is confident that they will enhance shareholder value over the long term.
 
Likewise, MHP will also stand to benefit as a health insurance company after the acquisition, as Coventry’s focus remains solely on serving the needs of health plan members.
 
Similarly, on February 1, 2010, Coventry completed the acquisition of Preferred Health Systems Inc., based in Kansas and the wholly-owned health insurance subsidiary of Via Christi Health System Inc. The acquisition will widen the customer base of Coventry’s diversified national managed healthcare portfolio in the Midwestern United States.
 

Overall, we believe that the company’s acquisitive growth strategy targets small, local health plans and is largely focused on expanding in the Midwest, where it can leverage its regional service centers and improve operating efficiencies, largely through economies of scale.
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