Travelers Corp. to Acquire U.S. Behavioral Health

Travelers Corp. said Wednesday that it intends to buy U.S. Behavioral Health of Emeryville, a provider of managed mental health and substance abuse services for employers and insurers.

Travelers, a Hartford, Conn.-based insurer, said the acquisition will strengthen its ability to help customers control the cost of mental health and substance abuse benefits. The transaction is subject to regulatory approvals and negotiation of a definitive purchase agreement, Travelers said. Neither company would disclose financial terms.

Managed health-care companies monitor the efficiency and quality of medical and mental health services, promising clients better care for their money. Managed mental health has emerged as a specialized business in recent years, as many employers have separated mental health services from other health-care benefits. The industry has grown rapidly in the past five years as the cost of providing mental health services has outpaced the general rise in health-care cost.

U.S. Behavioral is a privately held firm--owned by venture capitalists, current and former managers--that was founded 11 years ago to provide managed mental health services to customers in Northern and Central California. It has expanded into Southern California and throughout the West Coast, serving about 650,000 people, said Eugene Hill, U.S. Behavioral’s president.

The merger with Travelers would be a strategic fit for both companies, Hill said, and specifically provides U.S. Behavioral with an expanded market and resources.

Travelers said it intends to merge U.S. Behavioral Health with its PsychSystems Inc. unit, which provides a managed care program for psychiatric and substance abuse services nationwide. The merged units would serve more than 4 million members in 1990, Travelers said. Members would be served through 64 specialized local provider networks, the company said. The merged network would apparently be the nation’s largest, eclipsing Cigna Corp.’s MCC Cos.