Thursday, March 20, 1997 | 11:59 a.m.
A lawsuit filed against Sierra Health Services for canceling a proposed merger with embattled Physician Corp. of America is "without merit," Sierra Health spokeswoman Ria Carlson said.
Sierra Health was named as a defendant in the suit, filed by Physician Corp. of America in federal court in Miami this week, which seeks specific performance of the merger agreement the companies executed last November, monetary damages and other relief.
Officials from Sierra Health, which serves more than a half-million people in Nevada and Texas through health maintenance organizations, known as HMOs, and other managed-care programs, announced Tuesday that the proposed merger is off.
The announcement ended weeks of speculation about problems with the merger, which would have created the nation's eighth-largest publicly traded managed health-care company.
Sierra Health had been reevaluating the proposed merger since Feb. 20 when it was projected there would be $250 million in losses for the third and fourth quarters of 1996. The losses came largely from four self-insured funds bought by Physician Corp. in 1995 and now considered insolvent by state insurance regulators.
"We have been reevaluating the merger, and discussing possible alternatives, but we just could not come to terms," Carlson said Wednesday.
But Stanley Kardatzke, chairman and chief executive of Physician Corp., told the Miami Herald: "We just feel Sierra breached the agreement."
Despite the $250 million in workers' compensation losses and prospect of being taken over by state insurance regulators, Kardatzke said the company's HMO core is sound.
Physician Corp. enrolls nearly a million people in its commercial, Medicaid, Medicare and workers' compensation plans in Florida, Texas and Puerto Rico. Kardatzke said the company intends to consider "a variety of options," including whether to seek other merger partners.
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