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PPO NETWORK TO GROW

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IRVINE, Calif.-Self-insured employers and other health care payers would benefit from the merger of two privately held preferred provider organizations, a consultant says.

The planned merger of Beech Street Corp. and CAPP CARE Inc. will result in a strengthened network that will ease access for employers with multistate locations, said Dale Macrae, a principal with William M. Mercer Inc. in Orange, Calif.

In announcing the merger plans last week, Irvine, Calif.-based Beech Street and Newport Beach, Calif.-based CAPP CARE said their merger will create a health care management company with the nation's largest independently owned preferred provider organization. The privately held companies did not disclose the terms of the deal.

Being independent "means we will have no insurance company ownership, no HMO ownership, no hospital ownership," said George Bregante, Beech Street's president and chief operating officer. For health plan customers, "that is very important, because they do not want to do business with a PPO that is owned by their competitors," Mr. Bregante said.

Some employers purchase services from both companies. The two organizations' networks now have a 70% overlap nationwide. Therefore, employers will be able to access a single network service covering 30% more geographical area than either company now provides, Mr. Bregante said.

Beech Street contracts nationwide with more than 4,300 hospitals and health care facilities, 320,000 provider locations and serves 15 million lives. CAPP CARE contracts with more than 4,700 facilities, 265,000 provider locations and serves more than 4.2 million lives.

Each entity will bring different areas of expertise to the new company, Mr. Bregante said. Beech Street now has workers compensation services that CAPP CARE does not offer, while CAPP CARE has medical management services that Beech Street does not.

Dr. Edward Zalta, CAPP CARE chairman, said: "Customers will benefit from the advantages of working with fewer national PPOs and a greater geographic depth of the network."

"Our combined companies will also provide advanced technology-based administrative solutions to lower the cost of delivering health care," he said.

The transaction comes as PPOs, along with other managed care companies, merge to maximize operating efficiencies and leverage electronic administrative technology.

The deal is expected to close by the end of August. No obstacles to the merger are expected, Mr. Bregante said.