Beech Street Corp., a Lake Forest operator of preferred provider organization healthcare networks, is becoming the model for its parent company’s expansion plans.
The company was bought for $165 million in late 2005 by what’s now Viant Holdings Inc. of Naperville, Ill.
“Beech Street really has become what I would call the cornerstone of Viant’s continued investment in the managed care industry,” said Tom Bartlett, Vi-ant’s Illinois-based president.
Viant, which split off from Concentra Inc. of Texas earlier this year, didn’t offer preferred provider plans prior to Beech Street.
“Beech Street is an entree, if you will, in owning a managed care network for the health insurance industry,” Bartlett said.
Preferred provider plans offer patients access to a group of doctors, hospitals and other healthcare providers, which accept a reduced fee from insurers.
Beech Street doesn’t actually offer health insurance. Instead, it puts together groups of healthcare providers that insurers and others can tap.
The company, which was started in 1951, contracts with large employers, unions, city governments and others backed by insurers for access to its network.
The company “is one of the oldest PPO networks in the country, and depending on who you talk to, some people would say it was the first PPO,” Bartlett said.
Beech Street put together its first preferred provider network in 1984.
It and other PPOs are in a segment of health insurance that has remained popular. PPOs are a form of managed care, though they’re seen as less restrictive than health maintenance organizations.
Some 158 million Americans are enrolled in PPOs, according to figures from the American Association of Preferred Provider Organizations, an industry group.
Beech Street’s Network
Beech Street operates nationally and has roughly 500,000 doctors and 50,000 other providers, including physical therapists and nurse practitioners, in its network. It has 4,500 hospitals.
To control costs, patients who receive their healthcare from an “in network” provider get most of their care paid by the employer or the employer’s insurer. Those who get care from doctors outside the network foot more of the bill.
For doctors, PPOs work like a traditional insurance plan but pay them less.
They’re paid for each visit and procedure at discounted, negotiated rates. The upside for doctors is that PPOs steer patients their way.
Slow, Steady Growth
William Hale, Beech Street’s now retired chief executive, said in an earlier Business Journal interview that the company grew in a slow, steady fashion.
“We don’t hit big home runs,” Hale said. “We hit lots and lots of singles.”
Hale stayed with Beech Street during 2006 and part of 2007 before retiring earlier this year.
“From my understanding, he’s playing quite a lot of golf,” Bartlett said.
Hale could re-emerge in the industry, according to Bartlett.
He “had a very productive career in healthcare,” he said of Hale. “He’s well known in the industry. He remains very active in a number of the large managed care associations.”
For growth, Viant plans to look to buy smaller PPO networks in Texas, New York, Florida and California, Bartlett said.
“We are active buyers of PPO networks that have market distinction, market advantage,” he said. “Our objective is to grow our company rapidly through the use of networks.”
Beech Street’s seen growth in Las Vegas among health plans sponsored by labor unions.
“They’re looking for more hands-on customer service, more local representation,” Bartlett said.
Rivals
Viant competitors include First Health Group Corp., part of Coventry Health Care Inc., and companies that include PPOs among their managed care offerings, such as Aetna Inc., Cigna Corp., Health Net Inc., WellPoint Inc. and UnitedHealth Group Inc., parent of Cypress-based PacifiCare Health Systems.
Viant expects to finish 2007 with $215 million to $220 million in revenue, Bartlett said. The company has thought about going public but plans to stay on its own for now, he said.
“At our size, we’re probably really not a good candidate to go public,” Bartlett said.
Bartlett, who keeps an apartment in Orange County, travels to Beech Street’s Lake Forest office monthly. The site has 200 to 250 workers.
Beech Street’s building is set to get a new sign with the Viant name in the next few months, he said.
