Maralyn's Blog
Sometime in the time period of 2014/15, the executives of Group Health Cooperative (GHC) made the decision to put GHC for sale. On December 3, 2015, GHC made a public announcement that Kaiser Permanente (KP) (headquartered in Oakland California) and GHC signed an Acquisition Agreement on December 2, 2015, whereby KP would acquire GHC for $1.8 billion. GHC called a Special meeting of GHC members for January 30, 2016 to review and conduct an advisory vote on the proposed transaction. The calling of a Special Meeting just fifty-eight (58) days after the announcement is a key element in the GHC plan to obtain membership approval.

The campaign by GHC to “sell” the proposed acquisition of GHC to GHC members is characterized by several questionable actions by GHC leadership which are:

GHC was founded in 1947 to provide affordable quality health care to members under the principles of self-governance by the members – i.e. operate in a democratic form of organization wherein the members have a strong voice in the operation of the cooperative, in selecting executive leadership, for the benefit of the members. The sale of GHC to KP will result in one member (KP) making all decisions and eliminating all member voice in the operation of the organization. GHC would become the eighth region within the KP organization. GHC did recognize the loss of governance as the one major negative aspect of their proposal.

The Acquisition Agreement with its one hundred thirty two (132) pages of “legalese” was only available to members on the GHC website, and at a date after the announced acquisition. This document with its paragraph references and counter references, paragraph by paragraph and its “whereas statements,” challenges most attorneys, let alone average members.

GHC initially withheld a professional financial evaluation of the fairness of the price of GHC from the members. (See reference to Evercore Group L.L.C. evaluation in Board of Trustees Resolution No. 2015-08). The GHC Board of Trustees engaged “Evercore” on June 1, 2015 to evaluate the financial strategic alternatives available for GHC going forward. (See also note on June 30, 2015 unaudited financial statement for GHC.) Members cannot judge the effect on themselves or the fairness of the transaction without this information. GHC did release to the members at a later time, the opinion letter from Evercore. More about Evercore later in this paper.

Members might approve the acquisition if they understood the details of the transaction and had the information to judge for themselves the effect and fairness of the transaction on their interests.

GHC leadership announced the proposal on December 3, 2105 and set the meeting date as January 30, 2016, fifty-eight (58) days later; disenfranchising the vast majority of GHC members. GHC leadership manipulated the dates of presenting the proposal to members and all subsequent events as to exclude about ninety-two percent (92%) of GHC members (352,000-27,000/352,000) to be eligible to vote on the proposal.

Paragraphs 2.8 of GHC By-Laws stipulate a waiting period of sixty (60) days after member registration before a member is eligible to vote. By setting the membership meeting date inside the sixty day waiting period, GHC limited the number of voting members. This tactic gives GHC a significant advantage in obtaining a two-thirds majority of members who vote, which is required to pass the proposed acquisition transaction.

GHC has “encouraged” employee members (about 6,000 persons) and other members to vote for the proposal by using the “stick and carrot” method of motivation. If you do vote for the proposal, you should expect continued employment and a monetary bonus if you are a doctor, and continued availability of affordable health care if you are a member. Assuming only about half of voting members actually vote, the six thousand (6,000) employee members who have been “encouraged to vote for the proposal,” constitute nearly sixty-seven percent (67%) of the votes needed to approve the proposal. (27,000 voting members, with 13,500 actually voting and 2/3 of those voting <9,000> needed to approve the proposal.)

Considering the membership Special Meeting held January 30, 2016, one thousand six hundred one (1,601) voting members participated. This represents 5.9% of the voting members and 0.45% of total membership. A significant number of those at this meeting were employee members evidenced by their wearing shirts indicating their employment at GHC.

GHC leadership could have set the meeting date as they desired and could have set the date to allow members to register and vote on this fundamental event of dissolving the Cooperative; i.e. set the date in late February or March.


The “resolution and Plan for Approval” presented by the GHC Board of Trustees provides for members to vote to amend the GHC Articles of Incorporation and the GHC By-Laws which:

    1. Changes the organization from Cooperative to corporate

    2. Eliminates any overview or participation or governance by members individually or as a group

    3. Effectively transfers all GHC assets to Kaiser without any funds going to or for the direct benefit of members

    4. Does not mention possible negative impact of the changes on members other than loss of governance.

Members were not given the option to discuss and vote on the transaction itself. Members might approve the acquisition if they could review the Agreement and all related documents.

Members are uninformed as to the details of the acquisition and the effect on themselves.


GHC-KAISER agreed a purchase price of $1.8 billion

As of December 31, 2014, per unaudited GHC financial statements, GHC has:

  1. $2.003 billion of total assets; with net liabilities of $1.044 billion,

  2. The replacement value of fixed assets could exceed $2.0 billion alone!

  3. Nine month revenues (2015) of $1.757 billion, estimated as $3.7 billion of the year 2015,

  4. “excess of revenues over expenses” (profit in a corporate form,) of $131 million, net income 7.4% of revenue for three quarters of 2015 estimating a full year net income of at least $175 million

  5. financial reserves of about $888 million

  6. Excess reserves of at least $550 million (from 2014 data,)

  7. Valuation should be in the range of $2.2 – 2.5 billion.

A brief review of three other publicly announced acquisitions of health care organizations, indicates a multiple of fifteen (15) times net income as the offering purchase price. The KP offer is only about ten (10) times net income.

A third party purchase proposal should be sought to assure members the proposed transaction values GHC at fair market value.


GHC was formed in 1947 as a Cooperative “to provide affordable quality health care for the members.”

Over the next seventy (70) years GHC grew and today has about 352,000 members, writes some seventeen (17%) percent of health care insurance in Washington, has revenues of about $3.7 billion per year, is quite profitable at 7.4% of revenues, has net assets in excess of $1.0 billion, estimated replacement cost for fixed assets of $2.0 billion, excess financial reserves of about $550 million – GHC is financially strong.

These assets were accumulated over seven decades to ´”provide affordable quality health care for the members,” and should be used for the direct benefit of GHC members and should not be given away to some other organization, even to a charitable organization.

The proposed transaction distributes ninety five (95%) percent of the purchase price to a new GHC Foundation, which may benefit all the residents of Washington, but will not directly benefit GHC members as originally intended. – at least a moral and ethical violation of the purpose of GHC.

A more suitable sale transaction would distribute the “transaction consideration” to an escrow account equally divided among GHC members as of the date the proposed transaction was publicly announced by GHC. The members could then use the funds in their accounts to purchase medical insurance, pay co-pays, pay deductibles, pay unreimbursed medical costs, etc. “to provide affordable quality health care.” Each member is being deprived of about $4,900 of value for health care. (This distribution does not require a change to the GHC Articles of Incorporation by a member vote.)


GHC told members and employee members that “enrollment has declined in the last several years, and we (GHC leaders) are deeply concerned by this trend.” GHC members were also told that without member support for the proposed acquisition, GHC would most likely not be able to continue into the future to provide affordable quality health care for the members. (See page 12 of the Special Meeting booklet.) This double edged scare that enrollment is declining and GHC’s financial health was intended to scare members to accept the transaction. Both claims of declining membership, and shaky-not strong financial condition of GHC are inaccurate.

The GHC membership increased from the year 2012 with 338,892 members to 352,283 members in 2015. GHC operates a for-profit insurance group, GHC Options, and that group, not GHC, has declining membership. This is at best a deceptive use of data to make a claim to scare members.

GHC reported a respectable net income (profit - excess of revenues over expenses) in 2105 at about 7.4% of revenues, as of September 30, 2015. The net income was some 20% higher than the prior year to date.

As of September 30, 2105, GHC was financially strong with $1.5 billion of cash and invested assets. The excess surplus of GHC, surplus greater than required by law, was about $500 million and the surplus grew in 2015 by some $240 million. GHC management decided to accumulate added surplus funds rather than invest in infrastructure which helped support a scare tactic that GHC is not (capable of ) making investments in the future and needs to be sold to KP to secure our future.

GHC reported to members that the Group Health Physicians (GHP), a for profit organization, a separate and independent group of doctors that contract with GHC to provide medical services to GHC members, are in support of the proposed transaction. GHP is an independent medical group owned by the physicians and clinicians and exclusively provides care for GHC members and other patients, i.e. patients of Group Health Options, a “for profit” portion of GHC. The support of GHP was, at least partially obtained, when KP offered the doctors a retention bonus of some $100,000 over four years if the transaction closes. (In politics, this would be called a bribe.) The doctors, eager to retain their employment and also eager to receive a large cash bonus, are understandably in support of the proposal. But, members were not directly told of the bonus in relation to the strong support from the doctors. Minimally, this is deceptive.

GHC contracted with Evercore Group LLC and reported in the January 30 Special Meeting that Evercore reported the purchase price to be paid by KP was fair. The representation of the Evercore opinion is easily misinterpreted, especially by unskilled and inexperienced audience of employees and GHC members in interpreting such information, most of which are neither accountants nor lawyers.

GHC requested Evercore evaluate the fairness of the transaction strictly from a financial point of view as to the purchase price. Evercore relied on without independent verification the accuracy and completeness of the information and data submitted by GHC as well as publicly available information. Evercore did not express a view as to any of the projected data for reasonableness, completeness, accuracy nor the assumptions upon which they were based. Evercore expressed no opinion regarding the fairness of the transaction to the members, creditors or any other group. Evercore did not express any opinion as to the amount of or nature of compensation to be paid or available to any officers, directors, trustees or any other group (i.e. golden parachutes.) The opinion did not address the relative merits of the transaction compared to any other transaction or business strategy in which GHC may engage or of the merits of the underlying decisions by GHC to enter into the acquisition agreement. The engagement by GHC of Evercore was a limited engagement controlled by GHC as to content, data to be considered and therefore the value of the opinion is also very limited.

Finally, GHC will pay Evercore a “success fee” if the transaction is consummated. What a strange term for an appraisal agreement. Appraisals should be undertaken with neutral point of view and present an evaluation of the firm from an overall market value perspective. This engagement does not meet the normal situation and does not meet the standards of being neutral and a representation of market value. Members and other persons may easily and improperly conclude that Evercore represented the purchase price to be from a market place perspective, which simply is not the case. A market evaluation would have and should have considered GHC as a going concern and valued GHC as if another knowledgeable and financially responsible party were to make an offer to acquire GHC. Appraisers are to be neutral and not prepare or submit opinions which favor the seller or the buyer. The presence of s success fee should be considered a conflict of interest.


A small, focused group of GHC members read the materials available from GHC and concluded the proposed transaction is not in the best interest of GHC members. This group, the CON group, repeatedly requested access to more data, the Evercore analysis, access to GHC voting member list, and made other requests for information. GHC denied these requests.

GHC said the Evercore analysis is proprietary and cannot be shared. However, after reading and digesting the Evercore opinion letter, which was subsequently released, and understanding the limited and restricted engagement of Evercore, the analysis of Evercore processes seems unnecessary. (A more appropriate analysis would be to have an experienced and respected third party evaluate GHC as a going concern and report the true market value of GHC to other potential buyers.)

GHC leadership denied access to a list of voting members preventing the CON group from communicating another perspective to the voting members. The alone violates the spirit and intent of being a cooperative organization. GHC made the denials saying HIPPA requirements prevented GHC from sharing such information. However, GHC themselves used such member information (names, member voting registration, addresses ) in their mailing of materials to members , used member ID information to conduct GHC electronic communications (e-mail and telephone calls) to members as well as used the same member data to register members at the Special Meeting. All of which are non-medical uses of member information. In some cases, GHC used outside personnel, volunteer or contracted persons, to perform these communications. How does this respect and meet HIPPA requirements? If GHC can share member information with outside persons, surely the sharing with GHC members under whatever agreement is necessary should be permitted. Moreover, GHC collected member data when distributing the electronic voting devices at the Special Meeting and tied member ID numbers to the specific serial number of each voting device, thereby allowing GHC to track how each member voted. So much for honoring member confidentiality and HIPPA

Finally, the GHC chair mentioned the name and member number of one member when introducing her to at the Special Meeting; thereby disclosing member ID information.

GHC arranged and managed the Special Meeting agenda in such a manner as to minimize the impact of any message presented by the CON group. While GHC had spent considerable time and resources communicating the PRO message to employees and GHC members, GHC established a meeting agenda which favored the GHC sponsored PRO position. GHC held many employee and member meetings, conducted telephone calls, sent electronic messages, send printed materials, over several weeks distributing the PRO message. Those persons attending such meeting that tried to make CON remarks were either not called upon or GHC would rebut any CON remarks in such manner as to infer the CON speaker did not understand the situation.

The meeting rules prevented the CON group from presenting a consistent and unified message. CON speakers were randomly drawn, limited to two (2) minute talks and interspersed with PRO speakers. The CON group was not allowed any direct time on the agenda to present a position to the audience which would allow the members to understand the CON objections. See meeting rules 5, 7, and 8 which substantially restricted information flow to the members.


The offer of significant retention monies to doctors, the offer of success fee to the appraiser of GHC’s value, and the distribution of nearly the entire sale proceeds to a new Foundation controlled by key GHC persons are all important potential conflicts of interest.


The GHC Articles of Incorporation specify that GHC was formed to provide affordable quality health care for GHC members. Article IV of the GHC Articles specifies that “in the case that the corporation is dissolved, any monies or assets remaining after payment of creditors shall be donated by the Board of Directors to a health organization that is described in Section 501(c)(3) of the Code and has purposes similar to those of this corporation, or to the federal government or a state or local government for a public purpose.” (See page 14 of the GHC Special meeting booklet.) GHC proposes those funds, of about $1,724 billion, be donated to a new non-profit Foundation, the Group Health Community Foundation.

GHC leadership, in the literature submitted to the members proposing the Acquisition Agreement, said “specific strategies for the new Foundation have not yet been developed. Its work could include funding local public health initiatives and clinics, advocacy to drive bold policy options for health,” and more. But, nowhere does the literature indicate the funds will be or could be used to provide affordable quality health care for GHC members, which is the primary purpose of GHC itself. Hence, it cannot be argued that the new Foundation will be similar to the purpose of the corporation and therefore the distribution of sale proceeds to new Foundation is not consistent with the Articles of Incorporation. And further, such distribution should be judged as unacceptable and should the transaction close, the applicable sale proceeds should be directed to an organization which will continue to provide affordable quality health care for GHC members.


The Group Health Foundation (GHF) was formed in 1983 and has accumulated about $23 million is assets in its thirty-three (33) year period of existence. On average, GHF assets increased about $700,000 per year. The proposed donation of $1,724 billion to a new Foundation represents about two thousand four hundred and sixty-three (2,463) years of average increase of assets in the GHF. By any measure of sanity, this is excessive, unusual and unreasonable.


The new Foundation will be governed by a small group of persons who self-selected themselves to manage the $1,724 billion in assets of the new Foundation. The By-Laws, Articles of Incorporation and operating policies and practices are not and will not be subject to the governance nor scrutiny of GHC members. Those persons will be able to set their own polices, their own compensation and expenses reimbursements, their benefit plans, etc., etc. and are not subject to public reporting this could be one of the biggest golden parachutes ever conceived in America. Some may think of this arrangement for managing eh new Foundation as self-dealing.

Following GHC principles of operating an organization by democratic principles, those persons managing the new Foundation should be selected by the members themselves and subject to reporting to members, membership approval of policies, etc., and membership approval of compensation and benefits.


The very existence of such a self-selected group to manage and control the bulk of assets accumulated over seven decades in GHC; suggest a possible violation of fiduciary responsibility.

Further, GHC leadership did not undertake through Evercore or other known entities a market evaluation of GHC as an operating concern. The true market value of GHC as a going business was not evaluated and not was reported to GHC members. It is quite possible GHC is undervalued and GHC leadership did not take appropriate actions to insure a true market value is being represented in the acquisition agreement.


Conduct a public campaign to inform and advise GHC members as well as the general public of the nature of and the specific objections to the proposed transaction. Such a campaign could consist of rallies, informational picketing at GHC and KP headquarters, offices and other facilities, press conferences, public meetings, press releases and other activities to inform GHC members, government officials and the general public.

Seek another knowledgeable and responsible organization to submit unsolicited proposals for purchasing GHC. Fifteen (15) other organizations have been identified as potential purchasers of GHC. GHC leadership put GHVC in play themselves. There organizations, public and private, could be invited to investigate and review GHC as a going business, and make offers if they chose to do so. If GHC leadership does not engage any or all organizations which ask to review GHC, under confidential disclosures, of course, then it could be judged that GHC executives are not meeting their fiduciary responsibility to obtain the best offer possible – price plus terms and conditions - for GHC assets. While GHC is prohibited from soliciting other offers per the Acquisition Agreement, GHC should be open to and work positively with any and all other organizations desiring to investigate GHC as an acquisition candidate.

File a civil lawsuit (possible class action) asking for:

Suspension of all GHC activities toward the membership vote until the CON group can communicate with members about the Con perspective

Provide digital and hardcopy information for all voting members to the CON group allowing the CON group the same access to and ability to communicate with voting members as was already done by GHC,

GHC provide funds of $500,000 to support CON member communications as GHC funds were used to develop and communicate the PRO position,

Provide adequate funds from GHC for the CON group to engage an independent experienced organization to estimate a market value on GHC as a going concern,

Set a new date for the membership vote at least 90 days after the CON group communicates to the membership,

GHC. at GHC expense, conduct employee and member meetings similar to those already conducted and for the purpose of the CON group communicating the CON perspective in such smaller and more interactive settings,.

GHC call another Special Meeting, at GHC expense, at the same venue, the same technical support, the same paid parking and child care, the same food, etc., and with a similar agenda, managed by the CON group to be conducted by the CON group to present their perspective to employees and members.

Ask the attorney general and or the office of the insurance commissioner to intervene based on the above concerns and possible other civil and/or criminal concerns and grant the items listed above. your social media marketing partner

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