A $240 million Coral Gables private equity fund is buying Universal Health Care, promising to invest enough to resurrect both the depleted reserves and poor quality ratings that have hammered the St. Petersburg Medicare insurer.
The buyer, MBF Healthcare Partners, also pledged Wednesday to keep the headquarters and remaining 1,000 employees of the troubled insurer in downtown St. Petersburg, though with different leadership.
Dr. A.K. Desai, Universal's founder and a well-known player in both the HMO world and Republican politics, will no longer be CEO and chairman but he will play a role in the organization, MBF spokesman Marcio Cabrera said.
Miguel B. "Mike" Fernandez, MBF's chairman and a longtime friend of Desai's, indicated teams from both companies would work together on a smooth transition. "Dr. Desai is a healthcare visionary and together we hope to build a leading HMO," he said in a statement.
Financial terms of the acquisition, which is expected to close in the first quarter, were not disclosed.
MBF invests in health care companies and is the parent of Simply Healthcare Partners, a south Florida Medicare and Medicaid insurer which has been aggressively moving into the central Florida market. Simply HealthCare, which currently has about 100 employees in Tampa, will remain in a separate location and run independently of Universal.
Founded in 2002, Universal has been on a financial roller-coaster through much of its history. Though it faced a regulatory threat of liquidation about five years ago, Universal rebounded strongly, becoming a major downtown St. Petersburg presence and expanding into 20 states.
The roller-coaster turned south, however, more recently.
Regulators in two states cracked down in November and December with separate consent orders that banned the insurer from issuing new policies. Insurance regulators from Georgia and Ohio cited concerns over the company's relatively low reserves compared to its rising losses of more than $27 million in 2011 and $22 million in the first six months of 2012 alone.
In December, the company laid off at least 100 employees at its downtown St. Petersburg offices in part because of disappointing sales during the fall open enrollment period for Medicare. Another layoff followed. The Times reported last week that Universal Health Care told agents that it has stopped marketing its Medicare services in all areas. Its notice did not cite a reason.
Discussions with MBF began about a month ago. The deal includes Universal's approximately 150,000-square-foot home at 100 Central Ave., a distinctive downtown building once earmarked for a department store. Cabrera said MBF has "absolutely a long-term commitment" to staying in the headquarters, branded as 1 Universal Way.
MBF has not yet named a new leader for Universal, but Cabrera indicated a desire to move quickly to shore up morale.
"There's been a lot of negative press Universal has received and that has caused some departures in management," he said. "We want to make sure we bring some stability to the workforce."
Cabrera said the equity group, which has deployed about half of its $240 million fund to date, will make "a significant capital infusion" into Universal's reserves to alleviate regulators' concerns.
He said investors are also concerned about the quality of Universal's operation and plan to "augment their quality by bringing in additional personnel."
Universal has been losing members after being billed as a "consistent poor performer" by the federal government, which suggested in a letter to Medicare recipients in the fall that they consider shopping around for other options.
Executives with Universal have not returned multiple requests for comment over the past week.
In a statement Wednesday afternoon, Desai said the deal "will further enable Universal to transform health care in America and preserve jobs here in Florida."
Jeff Harrington can be reached at [email protected] or (727) 893-8242.