Priority Health wanted to build a book of business in Southeast Michigan for its Medicaid HMO.
Total Health Care Inc. wanted to connect with a larger partner to better compete.
Leaders of the two nonprofit health plans who had known each other for years started talking in early 2019 about what they could offer one another and potentially partner on. By August of that year, they worked out a deal to merge Total Health into the Grand Rapids-based Priority Health, Michigan’s second-largest health plan with 1 million members enrolled statewide in group, individual, Medicare and Medicaid policies.
“It was a great combination of two longstanding Michigan-based health plans,” Priority Health Chief Financial Officer and Senior Vice President of Operations Mary Anne Jones said. “It was a great complement and fit for Priority Health and Total Health to come together. We are statewide and have a very strong focus in Southeast Michigan, but we were not able to serve the Medicaid population there. To be able to bring that into our offerings just made a lot of sense.”
Judges in MiBiz’s 2021 M&A Deals of the Year Awards named Total Health Care’s merger into Priority Health as the winner in the health care category.
One of the oldest health plans in Michigan that was formed in 1973, Total Health Care at the end of 2019 had a combined membership of more than 87,000 members. That included 48,919 members enrolled in its Medicaid HMO, and another 39,412 enrolled in group and individual commercial policies sold through Total Health Care USA.
Should the state re-bid Medicaid HMO contracts in the next few years, the Total Health merger puts Priority Health in a stronger position, Jones said.
“It really has moved us to become a more statewide (health plan) in serving Medicaid, and that’s very important in our mission,” she said.
Total Health Care CEO Randy Narowitz described the deal as “a great fit for both companies.” The merger into Priority Health would give Total Health Care “additional resources and stability, and allow us to continue to provide our members with the quality care they have come to expect from Total Health Care at a price they can afford,” Narowitz said in an announcement of the merger.
Under terms of the deal that closed Jan. 1, 2020, Priority Health and Total Health Care committed to sharing best practices for the Medicaid market in Michigan. Priority Health also committed $25 million over three years for a foundation to support health initiatives to improve care and social determinants of health in the Detroit area.
Forming the foundation was “the most interesting” and a unique aspect of the deal, Jones said. The foundation has been receiving grant requests from organizations across Southeast Michigan and should award its first grants soon, she said.
Since the deal closed, Total Health Care has operated as a subsidiary of Priority Health as its two health plans focus on Detroit and surrounding communities. Total Health’s structure as a subsidiary could change as Priority Health now works this year to fully integrate the company’s operations and HMO plans, Jones said.
“From an integration perspective, we really took the first year of 2020 to just make sure that we kept the Total Health operations and systems in place to assess how we want to do the integration. In 2021 we are working on integrating our back-office systems and employees into combined teams,” she said. “They will continue underneath Priority Health. We’re still assessing if they will continue long term as subsidiary entities or products within Priority Health, but we will be continuing the Total Health products.”
The initial discussions in 2019 were key to bringing the two companies together. Executives focused first on culture and fit that set the foundation for a “very thoughtful, holistic” process today that focuses on processes, technology and “how we can best combine our talent and teams,” Jones said.
“The relationships we built before we even started discussing a merger positioned us really well to know that we had a strong fit,” Jones said. “We intentionally took the time to really assess how we wanted to go through our integration processes and build those relationships, and that has built a lot of confidence and trust with the Total Health staff and leadership team there.”