Highmark Inc. (Pittsburgh PA), which has lost about $773 million on the federal health insurance marketplace, is seeking to sell its vision unit, which could fetch around $2 billion.
“We always keep our options open,” Highmark spokesman Aaron Billger said. “HVHC is one of the most successful vision businesses in the industry that we built from scratch.”
It certainly is a strategic investment for Highmark. HVHC includes Visionworks, a group of 700 stores in 42 states, and an optical-insurance division called Davis Vision. The vision unit fabricates more than 4.5 million pairs of glasses a year and turned a profit of $122 million on revenue of $1.5 billion in 2015.
“We are routinely contacted by people that are interested in this no-core business of ours,” Billger said. “Any decision will focus on our strategic vision for the future of health care and bringing value to consumers.”
According to the Journal, CapM is telling prospective buyers that HVHC should have revenue of about $1.65 billion in 2016, with adjusted earnings before interest, taxes, depreciation and amortization of about $190 million.
This spring, Highmark reported an operating loss of $565 million for 2015, attributing the financial challenge to the high cost of health care for people who buy federal Affordable Care Act health insurance plans. The nonprofit corporation has attributed marketplace losses in 2014 and 2015 to providing coverage to people who were sicker than expected.
It sued the federal government in May, seeking $223 million in payments it said it is owed for treating those patients in 2014. James McTiernan, area vice president for national consulting firm Arthur J. Gallagher, said selling HVHC could help Highmark’s cash flow.
“It’s something that has a lot of instant value to them, and they could use the money for their core business–that being health insurance and healthcare delivery,” he said. “In that sense, it makes a lot of sense.”
If true, the move to shed HVHC would signal the likely end of Highmark’s 20-year vision business, launched in 1996 when it paid $164 million for New York-based Davis Vision. In 2015, HVHC, headquartered in San Antonio, TX, recorded $1.5 billion in revenue with an operating profit of $122 million.