Centene caps a busy month with its planned acquisition of a large Medicare Advantage provider in South Florida.With an eye toward expanding its footprint in government-sponsored healthcare, Centene Corp. agreed to acquire Community Medical Group (CMG), a primary care provider based in South Florida that serves more than 70,000 Medicaid, Medicare Advantage, and Affordable Care Act (ACA) enrollees. CMG currently operates 13 medical centers and two specialty care facilities.
Centene Chairman and CEO Michael F. Neidorff said in a statement that the deal affirms the insurer’s “commitment to government-sponsored programs and creates a foundation for future growth.” No financial terms were released, but Centene noted that it would fund the purchase either entirely with cash or a combination of cash and stock. The deal is expected to close in the second quarter.
Changing Healthcare Landscape
The Centene-CMG deal reflects an ongoing trend of traditional health insurers acquiring other types of healthcare service providers in an effort to strengthen their services and gain control over where their enrollees access care. A similar deal occured last year when UnitedHealth Group purchased DaVita Medical Group for $4.9 billion.
Another offshoot of that movement is the recent series of mergers involving health insurance providers and pharmacy benefit managers (PBMs). Cigna, for example, announced in early March that it had agreed to acquire Express Scripts for $52 billion. Centene made a similar deal by investing in RxAdvance, a full-service PBM that will work in partnership with Centene’s Envolve Pharmacy Solutions unit. Centene also secured the rights to increase its equity investment in RxAdvance in the future.
With the CMG acquisition, Centene is also attempting to enlarge its presence in the growing Medicare Advantage marketplace just after the Centers for Medicare and Medicaid Services proposed increased reimbursements to insurers. Other major insurers such as UnitedHealth, Humana, Cigna, and Aetna have likewise bid for a larger share of the Medicare Advantage arena.
In a sign that Centene will further pursue government-sponsored healthcare programs, the Des Moines Register reported that the company was one of two bidders to take over Iowa’s $5-billion Medicaid-managed care initiative. The state seeks to replace the prior administrator, AmeriHealth Caritas, which decided to exit the program in the fall after sustaining significant losses.
Still Active in the ACA
As other insurers withdraw from the ACA, Centene has maintained its offerings on the state exchanges and plans to fill spots vacated by other insurers on exchanges in Kansas, Missouri, and Nevada. Centene currently serves more than more than 1.4 million ACA enrollees in 15 states. Despite continued uncertainty regarding the future of the ACA, the company posted a 22% rise in profits in the third quarter of this year, growing to $239 million since the same period last year.Despite its success, Centene’s practices came under fire in January, when it was hit with a class action lawsuit filed in federal court in Washington State claiming that it offered its members too few in-network providers. A spokesperson for the company declined to comment, but added that it believes it offers a sufficient number of providers.