The University is in the final stages of a deal to sell M-Care.

Officials announced yesterday that the University-owned nonprofit health care provider will be purchased by Blue Care Network of Michigan, a subsidiary of Blue Cross Blue Shield of Michigan.

A proposal will be presented to the University Board of Regents during its Sept. 22 meeting.

Until then, the University will not release the financial details of the sale, said Robert Kelch, chief executive officer of the University Health System and vice president for medical affairs.

M-Care insures more than 200,000 people, about 60,000 of whom are University employees, retirees and graduate students, as well as their dependents. The hundreds of Michigan jobs M-Care provides may or may not be eliminated if it is sold.

Kelch said it is an appropriate time for the University to consider selling M-Care.

To stay competitive in the health care industry, the University would have to make large capital investments in M-Care, which would drain the Health System's core projects and research, he said.

"The University of Michigan Health System has a complex and critical mission and we need to stay focused on it," Kelch said.

The two nonprofit organizations have a similar mission, making the pairing a good match, Kelch said.

Talks of the potential sale began late this spring, said Kevin Seitz, Blue Care Network president and CEO. The idea, he said, was not proposed by either provider but grew out of their established working relationship.

Dean Smith, a professor of health management and policy, said similar deals between insurance providers are common in the industry.

"Mergers and acquisitions are going on all the time, but the thing is, people don't notice it until it's their company," he said.

Smith said the industry's demand for consumer-driven health care, which requires large investments in information systems, may contribute to more mergers so that providers can share costs.

M-Care also employs about 400 workers in the Ann Arbor and Southfield areas.

The future of the employees, most of whom were notified of the potential sale yesterday morning, is still uncertain.

"Precisely how many employees will be retained and for what period of time has not yet been determined," Kelch said.

Until the sale is final, M-Care employees will continue working in their current jobs. If the sale goes through, the University and Blue Cross plan to keep on many employees through the transition period in a lease agreement.

Kelch said the University will offer assistance and support to employees seeking new positions but will not offer a severance package. If their jobs are cut, employees will be given at least 60 days notice, in accordance with University policy and federal regulations.

Following the regents' approval, the sale will require an OK from state and federal regulators, who will review the agreement and transition plans.

If approved by the regulators, who will likely take a few months to make their decision, the sale is expected to be finalized late this year or early 2007, Kelch said.

All of M-Care's HMO, PPO, GradCare and Medicaid programs will be included in the deal.

Kelch said M-Care customers will not experience any gaps in coverage during the transition. The University plans to continue M-Care coverage for employees, retirees, graduate students and their dependents through 2007.

After that time, former M-Care customers can purchase a plan through Blue Cross. The University will work with Blue Cross to develop a plan for employees equivalent to current benefits, Kelch said.

Premiums are not expected to increase as a result of the sale, he added.

Because Blue Cross and M-Care share many of the same health care providers, Kelch said customers will likely be able to continue seeing the same physician, "in an almost seamless matter."