FOUNDATION HEALTH SYSTEMS WRAPS UP ACQUISITION DEAL.

Byline: Ben Sullivan Daily News Staff Writer

Foundation Health Systems Inc. completed its purchase of an East Coast competitor Monday, three days after the Woodland Hills-based managed care company gained state approval to merge its two largest health plans.

FHS paid $271 million for Shelton, Conn.-based Physicians Health Services Inc. Physicians Health runs HMOs in Connecticut, New York and New Jersey with combined membership of about 500,000 enrollees.

FHS also said Monday it has expanded its holdings of First Option Health Plan of New Jersey, taking a controlling interest in the company and assuming its 270,000 members. Together with the Physician Health purchase, the deal gives FHS 1.2 million members in the Northeast. FHS purchased a third plan, M.D. Health Plan of Connecticut, in 1995. FHS said the deals make it the third-largest health plan operator in the New York tri-state region.

The deals came on the heels of an FHS announcement late Friday that it had received approval from the California Department of Corporations to merge its Health Net and Foundation Health subsidiaries. The organizations were the two primary health plans of Health Systems International and Foundation Health, which merged last year to form FHS. The two plans now will operate together under the Health Net name.

FHS shares closed unchanged Monday at $23.12.

In related news, Santa Ana-based PacifiCare Health Systems Inc. said Monday it will lay off 300 employees, or 3 percent of its work force, as a result of its merger last year with FHP Inc. PacifiCare has struggled since the merger to meet analysts' earnings expectations and has seen its share price drop on unexpected losses. PacifiCare shares closed down 93 cents to $49.50.