By Leslie Small
In a
$17.3 billion deal that would make the country’s largest Medicaid managed care
organization even larger, give it a greater foothold in Medicare, and perhaps
shield it from some policy uncertainty, Centene Corp. said March 27 that it
agreed to purchase WellCare Health Plans, Inc.
To Wall
Street analysts, the tie-up makes sense — even if not all of them were
expecting it.
“When
the headlines hit last night, we were somewhat surprised given [Centene’s]
already hefty Medicaid coverage/footprint, its strong track record of
retaining/winning RFPs [requests for proposals], and weaker currency given
recent stock performance,” Citi’s Ralph Giacobbe wrote in a March 27 note to
investors. However, Centene has “done well with recent larger deals,” and
WellCare does offer further scale and an opportunity to gain more MA business,
he added.
Overall,
“the deal puts Centene into a new tier as a significant player among the
diversified MCOs and solidifies its growth path for years,” Oppenheimer’s
Michael Wiederhorn wrote in a research note.
As
Centene is also the country’s largest carrier of Affordable Care Act
marketplace plans, some wondered whether its proposed purchase was a reaction
to the continued uncertainty over the ACA’s future — particularly in light of
the Trump administration’s recently shifted position on a lawsuit that seeks to
throw out the entire law.
Indeed,
Medicaid managed care expert Alex Shekhdar tells AIS Health, the move to
acquire WellCare “may be a bit of a hedge” against that issue. But Centene CEO
Michael Neidorff brushed aside concerns about the ACA’s future during a call
with investors, calling it “headline volatility” and noting that the current
litigation against the ACA has “a long way to play out.”
From Health Plan Weekly
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