As Centene Corp. and WellCare Health Plans, Inc. prepare to
create a "premier" government-sponsored health insurance entity, news
emerged earlier this month that certain Centene shareholders may be seeking to
block the deal in favor of selling Centene to a large company such as Humana
Inc. Although Humana declined to comment on reports of a possible friendly
takeover, industry experts say acquiring a major Medicaid provider would make
sense for the insurer given increasing integration of Medicare and Medicaid.
Centene in late March said it planned to buy WellCare for
approximately $17.3 billion. Reuters on May 6 reported that hedge funds Corvex
Management LP and Sachem Head Capital Management LP are exploring challenging
that acquisition; a report from StreetInsider followed that indicated Humana's
interest in pursuing a deal if Centene walked away from WellCare. But Centene
spokesperson Marcela Hawn affirmed the company's commitment to the transaction
in an email to AIS Health.
The reported desire of Centene shareholders to have an "arranged
marriage" with Humana is not necessarily surprising, given that Centene is
the biggest player in Medicaid with a desire to grow its MA business, remarks
Alex Shekhdar, founder of Sycamore Creek Healthcare Advisors. Such a deal would
have less market overlap than Centene-WellCare and therefore involve fewer
divestitures and an easier regulatory approval process, he suggests.
"This is all about duals, all about the interface of
Medicare and Medicaid and the potential growth of MLTSS [managed long-term
services and supports]," he says of a possible Humana-Centene combination.
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