UPDATE: Merged Sagamore could be tougher competitor

August 1, 2007
Cigna Corp.'s purchase of Sagamore Health Network should make it a more formidable competitor to Indianapolis-based Anthem Insurance Co. in the central Indiana health insurance market. And that could be a good thing for employers.

That's the initial reaction of one local health care expert after Philadelphia-based Cigna announced this morning it is acquiring Carmel-based Sagamore, the second-largest managed care organization in Indiana.

"It's going to help Cigna with employers," said Ed Abel, director of health care at Blue & Co., a local accounting firm. "They're [now] bringing a lot more providers to the table."

Anthem, a unit of Indianapolis-based WellPoint Inc., dominates the Indiana health insurance market. It has 1.6 million customers here-10 times more than Cigna.

Anthem owned about 30 percent of the Indiana market, according to IBJ 's 2007 Book of Lists. Sagamore claimed about 14 percent.

Terms of Cigna's acquisition were not disclosed. However, a Cigna official said the acquisition will add $15 million to $20 million of revenue per year.

Sagamore officials could not be reached immediately for comment.

"This acquisition strengthens our competitive position in the key growth market," Cigna President David Cordani told analysts this morning on a conference call. Cigna partnered with Sagamore in March to offer some of its Indiana customers access to Sagamore providers.

Sagamore is network of 36,000 doctors, 200 hospitals and 1,000 ancillary providers, Cordani said. Sagamore leases its network to employers and health insurers, whose workers and customers receive lower prices when they obtain care from the providers in Sagamore's network.

Sagamore was created in the mid-1980s by groups of Catholic hospitals. It is owned by the parent companies of St. Vincent Health and St. Francis Hospital and Health Centers, as well as the St. Joseph Regional Medical Center in South Bend.

Sagamore's membership had been slipping recently, even as Anthem's was growing. Sagamore claimed 725,000 as of January 2006, down from 772,000 in January 2004. Anthem, meanwhile, had added 100,000 customers, growing to 1.56 million.

"This brings pretty big penetration for Cigna," said Abel of Blue & Co. "Hopefully, it makes the marketplace more competitive. But only time will tell."
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