Amerigroup Corp. is citing a major New York state effort to manage long-term care costs (LTC) as a reason for acquiring Health Plus.

Amerigroup, Virginia Beach, Va. (NYSE:AGP), is one of a number of large but relatively low-profile companies that has been building up large Medicaid plan operations in recent years.

Lutheran Medical Center, Brooklyn, N.Y., organized Health Plus, Brooklyn, in 1984. Health Plus now generates about $1 billion in annual revenue from managing care for about 320,000 enrollees in state Medicaid, Family Health Plus and Child Health Plus plans.

Amerigroup has agreed to pay $85 million in cash for Health Plus and close on the deal by mid-2012.

Lutheran Medical Center – a community safety net hospital – hopes to use the proceeds from the deal to set up an endowment.

New York has a total of about 5 million Medicaid plan enrollees, including about 500,000 elderly enrollees who need long-term care and about 600,000 non-elderly enrollees who have disabilities, according to the United Hospital Fund, New York.

New York Gov. Andrew Cuomo, D, has been organizing a redesign of the Medicaid program that is supposed to make enrollment in managed LTC programs mandatory for many Medicaid enrollees who need LTC services for more than 120 days.

The state is expanding the LTC management requirements because of concerns about rapid growth in Medicaid LTC program expenditures, officials say.

- Allison Bell