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Regulators Schedule Review Of Completed Deal

By Staff Writer

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The Washington state insurance commissioner’s office is conducting a retroactive review of a 2-year-old health plan acquisition.

The investment firms that acquired Arcadian Health Plan Inc., Spokane, Wash., and its corporate parent failed to seek or obtain approval for the deal from Washington insurance regulators, according to officials in the office of Washington state Insurance Commissioner Myron Kreidler.

The officials will hold a hearing on the deal Sept. 7.

Arcadian Health Plan’s parent company, Arcadian Management Services Inc., Oakland, Calif., runs Medicare Advantage managed care plans in 8 states.

The investment firms, affiliates of Morgan Stanley, New York, and Three Arch Partners, Portolo Valley, Calif., paid about $19 million in August 2005 to turn a significant stake in Arcadian Health Plan’s parent, Arcadian Oakland, Calif., into a controlling stake, officials report in the hearing notice.

The Washington commissioner’s office did not learn of the change in control at Arcadian Management Services and Arcadian Health Plan until September 2006, officials say.

The investors that now control Arcadian Health Plan applied for the Washington commissioner’s approval of the transaction earlier this year.

During the upcoming hearing, officials say, Washington state insurance regulators will ask about the August 2005 change in control, and they also will evaluate the competence, experience and integrity of the current owners of Arcadian Health Plan.

“The second stage of the hearing will be, if the above criteria [are] deemed to be met based upon evidence presented during the first stage, a typical adjudication hearing regarding this request for approval of acquisition,” officials say.

Representatives for the investors were not immediately available to comment on the retroactive acquisition review.