BCBSD_HIGHMARK-PublicVersion_KPMGReport_ToBeFiled_9-19.pdf

1、Project DelawareAdvisory Services Provided to the Delaware Department of Insurance in connection withthe Proposed Affiliation between Highmark Inc.andBlue Cross Blue Shield of DelawareSeptember,2011PUBLIC VERSIONFILED 9/19/11 2011 KPMG LLP,a Delaware limited liability partnership and the U.S.member

2、firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative(“KPMG International”),a Swiss entity.All rights reserved.1This report is provided to the Delaware Department of Insurance(“DDI”)pursuant to our engagement letter,datedJune 13,2011,and is subject in al

3、l respects to the terms and conditions of that engagement letter,includingrestrictions on disclosure of this report to third parties.If this report is received by anyone other than our client,the recipient is placed on notice that the attached reporthas been prepared solely for our client for its ow

4、n internal use and this report and its contents may not be sharedwith or disclosed to anyone by the recipient without the express written consent of DDI and KPMG LLP.KPMG LLPshall have no liability,and shall pursue all available legal and equitable remedies against recipient,for theunauthorized use

5、or distribution of this report.2011 KPMG LLP,a Delaware limited liability partnership and the U.S.member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative(“KPMG International”),a Swiss entity.All rights reserved.2September 6,2011PRIVATEGene T.ReedDep

6、uty Insurance CommissionerDelaware Insurance Department841 Silver Lake BlvdDover,DE 19904Dear Mr.Reed:We have completed our engagement to assist the Delaware Department of Insurance(“DDI”,“Client”or“you”)in providing integration advisory support associated with your review of a proposed affiliationb

7、etween Blue Cross Blue Shield of Delaware(“BCBSD”)and Highmark Inc.(“Highmark”)inaccordance with the terms of our engagement letter dated June 13,2011,including its Standard Termsand Conditions.ObjectiveThe objective of our engagement was to assist DDI with its assessment of the proposed affiliation

8、between BCBSD and Highmark.You requested that KPMG assess and comment upon theconsultantsReportreferenced in our engagement letter and which was the focus of ourwork.Specifically,you requested we provide our point of view with regard to certain observations made inthe report around systems and techn

9、ology capability gaps and various investments the report outlinedas necessary for BCBSD to remain competitive in its marketplace.You also requested we commenton specific issues regarding affiliation integration and potential disaffiliation with Highmark.Weunderstand DDI will consider our comments wh

10、en deciding whether to approve the affiliation.In allcases,however,it will be DDIs sole decision whether or not to approve the affiliation agreementbetween the parties.Basis of informationAppendix 1 of our engagement letter provides additional details around the scope of advisory serviceswe were ask

11、ed to perform;it is included as an appendix to this report.Those services were selectedby you and were determined to best fit your needs for this engagement.We make no representationregarding the sufficiency for your purposes of the services you selected,and those services will notnecessarily disclo

12、se all significant matters about BCBSD or Highmark.This report was prepared onthe basis of the consultants reports,and relevant documents concerning affiliation plans and thetechnology environments of both BCBSD and Highmark as provided in the data room of Morris,Nichols,Arsht&Tunnell,LLP.We also co

13、nducted interviews with BCBSD and Highmark executivesand a representative of the consulting firm involved in the development of the 2008 and 2010 BCBSDassessment reports.Further,we referenced industry publications,internal and external benchmarkdata,and other publicly available materials to inform o

14、ur analysis.Based on our agreed-upon scope of services,we did not carry out the full set of diligence procedures,operational analyses,and supporting calculations as performed by the consulting firm who prepared theoriginal reports,to render our own assessment.Rather,we sought to understand the under

15、lying factors,key assumptions,and reasonableness of the consultants observations,recommendations and estimates.We then either confirmed our general agreement with the consultants results or provided observations,recommendations and cost estimates in accordance with our own analyses,points of view,an

16、d industryexperience.The services we performed were in accordance with the terms and conditions of our engagement letterand do not constitute an audit,examination,attestation special report,or agreed-upon proceduresengagement as those services are defined in the American Institute of Certified Public Accountants(“AICPA”)literature applicable to such engagements conducted by independent auditors.Accordingly,the services we performed will not result in the issuance of a written communication to th