Forum Credit Union buys health-care consultant: Financial institution beefing up commercial services

March 13, 2006

Forum Credit Union, central Indiana's largest credit union, has acquired Indianapolis-based health-care consulting firm Health Care Economics Inc. And banks are piping mad about it.

"It's part of our effort to meet the needs of what our members have been asking us to do," said Andrew Mattingly, senior vice president of strategy and marketing for Fishers-based Forum. "They want to put all of their finances together [at one institution]."

Health Care Economics primarily serves as a business consultant to medical practices with fewer than five doctors. It helps clients work through issues ranging from managed-care contracting to how to buy out a partner when someone retires.

The more than 3,500 clients in the firm's database will now have easy access to a range of Forum services, including tax planning, accounting and financing.

"Our firm has been in existence as a health-care consultant for 27 years," said Michael Brown, president of Health Care Economics. "And if our clients needed a bank loan, a CPA or tax planning, we could never do that. This fulfilled that."

The 54-year-old Brown will stay on in his current role and the business will retain its name.

The acquisition will allow Forum to continue growing the commercial side of its business, and will probably lead to gains in its investment and trust operations.

Forum already has assets approaching $1 billion, 90,000 members, and about 300 employees.

Depending on how many health-care clients use the credit union's services, Forum could see a quick gain in membership. Brown predicts more than a handful will take advantage of the new arrangement. Of the dozen clients he's spoken with about the sale, he said eight or nine have been excited about the idea.

Banks, however, say it's another example of credit unions having an unfair advantage because they don't pay federal income tax.

"It's just one more case of Forum leveraging their tax-exempt status," said Jim Cousins, president of the Indiana Bankers Association. "It's the same issue for us as the conference center they built. All their lines of business are tied to the fact credit unions don't pay taxes."

Forum completed a $25 million expansion, including the addition of a conference center, at its Fishers headquarters in August.

The Health Care Economics deal isn't raising any hackles with state regulators. Since Forum is buying the company through a tax-paying subsidiary, known as a credit union service organization, the process is as legal as selling apple pie on the Fourth of July.

Forum doesn't even need to file any paperwork with the state.

The acquisition is "perfectly acceptable," said Judith Ripley, director of the Department of Financial Institutions.

This isn't Forum's first foray into a business not historically associated with credit unions. The credit union started offering investment and estate planning in the late 1990s, a far cry from the traditional credit union product line that only includes savings accounts and consumer loans.

Forum also created a software package in 1998 known as Forum Solutions that helps determine credit history and approve loans. The technology's been so effective that Forum formed a separate company, Forum Solutions LLC, in 2000 to sell the software to other credit unions and banks. The subsidiary now employs 27 people.

Last summer, the credit union also purchased the Fishers-based accounting and tax firm Sturgis & Collins LLP.

"We're definitely ahead of the curve," Mattingly said. "A lot of credit unions are starting business services."

Forum says the criticism from banks is off base, primarily because the new venture is subject to income tax, just like its other noncore credit union lines of business, said Michael Peterson, Forum's senior vice president.

Health Care Economics employed seven people at the time of the sale. Four of the employees will be retained by Forum; three were given severance packages.

Neither Forum nor Brown would reveal terms of the deal, although Mattingly said the credit union looks at the move as "more of an expense item" than an "investment of capital."

"It's like paying a premium to bring someone on as an employee as opposed to buying a company," Mattingly said.
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