Aetna Launches A Full Service Behavioral Health Business To Strengthen Product And Service Integration
Effort includes purchase of business from Magellan Health Services
HARTFORD, Conn., December 8, 2004 — Aetna (NYSE: ΑET) today announced it will launch a full-service behavioral health business and end its contract with Magellan Health Services for behavioral health services as of December 31, 2005. To be operated under Aetna Behavioral Health, this business will allow the company to offer customers innovative, integrated programs expected to result in improved health outcomes, increased productivity and an enhanced service experience.
Pursuant to an existing agreement with Magellan, the company has decided to exercise its option to purchase the assets of Magellan that service the Aetna behavioral health business. The assets include three dedicated behavioral health care service centers and a provider network to service Aetna. The centers are located in El Segundo, CA; Sandy, UT; and King of Prussia, PA. The cost to exercise the option is expected to be in excess of $50 million, including the repayment of an existing $49 million note from Magellan to Aetna and a modest incremental cash payment to Magellan. In addition, Aetna expects to make a modest investment in systems improvements and other start-up costs in support of this business. Aetna expects to exercise its option effective December 31, 2005 at the conclusion of the company’s existing agreement with Magellan. The purchase would be subject to customary conditions, such as the receipt of federal antitrust regulatory approval. Until the exercise date, Magellan will continue to provide behavioral health services for Aetna.
"This transaction is about providing our customers with the highest quality services while effectively using our capital in a way that allows us to continue to grow our business profitably," said Aetna Chairman and CEO John W. Rowe, M.D. "We believe that by transitioning this business to Aetna, we will be better able to integrate our behavioral health benefits with our full suite of medical and specialty products."
Rowe said there are significant opportunities to improve care when medical and behavioral health services are integrated through innovative clinical programs. "There are important connections between mental and physical health that can be improved when these services are managed in an integrated manner," Rowe said. "By examining both medical and mental health claims data, we can make these connections and provide information to doctors, counselors and patients to help them improve health and increase productivity for members, while also helping manage health care and pharmacy costs," Rowe said.
Mark Bertolini, senior vice president of Aetna Specialty Products, which includes services provided by Aetna Behavioral Health, said the company went through extensive analysis before reaching the decision to exercise the option with Magellan. "This action aligns with Aetna’s strategic direction, and makes operational and financial sense for the company. Magellan has been a strong partner for seven years and we would like to thank them for their dedication and service to our members." Over the next year, Aetna will work with Magellan to seamlessly transition the business, Bertolini said.
As one of the nation’s leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, Aetna puts information and helpful resources to work for its approximately 13.6 million medical members, 11.6 million dental members, 8.3 million pharmacy members and 13.3 million group insurance members to help them make better informed decisions about their health care and protect their finances against health-related risks. Aetna provides easy access to cost-effective health care through a nationwide network of more than 646,000 health care professionals, including over 385,000 primary care and specialist doctors and 3,908 hospitals. For more information, please visit www.aetna.com (Figures as of September 30, 2004).
ADDITIONAL INFORMATION; CAUTIONARY STATEMENT -- Certain information in this press release is forward looking, including, but not limited to, the financial and other future benefits expected to be derived from exercise of the purchase option and operation of the business and the expected timing of the purchase. Forward-looking information is based on management’s estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna’s control. Important risk factors could cause actual future results and other future events to differ materially from those currently estimated by management. Those risk factors include, but are not limited to: the ability to successfully integrate the business operations described herein in a timely and cost-efficient manner, and obtaining required regulatory approval on a timely basis to close the purchase transaction and operate the business.
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