PacifiCare Plan to Buy FHP Gets Regulators’ OK

The Federal Trade Commission and the California attorney general’s office have cleared PacifiCare Health Systems Inc.’s proposed acquisition of rival managed-care company FHP International Inc., officials said Wednesday.

The approval comes despite criticism from consumer groups that the combined company would dominate the Medicare market across Southern California, leading to a decline in health care and a hike in prices.

PacifiCare, which said it expects to complete the deal early next month, still awaits approval by the state’s Department of Corporations, which regulates health maintenance organizations. The department’s commissioner, Keith Bishop, said Wednesday that he’ll hold hearings in Irvine and San Diego later this month before making his decision.

Consumer groups, incensed with the FTC’s approval, Wednesday called on state regulators to block the merger.

“We are shocked that a federal agency dedicated to protecting consumers against monopoly would not intervene to break up this deal, based on the fact that it will create one of the largest monopolies in the country for any industry,” said Jamie Court, director of Consumers for Quality Care, a Los Angeles-based consumer advocacy group.

An FTC spokeswoman wouldn’t comment.

The two companies’ markets greatly overlap in California, the home state for both. However, sources said government investigators concluded that the merger wouldn’t unduly concentrate the Medicare HMO industry in California, because numerous major competitors of PacifiCare and FHP have entered that market in recent years.