- Centene told Healthcare Dive it is "committed" to its $17.3 billion WellCare buy following a report by Street Insider that Humana is interested in a takeover of Centene and a Reuters story quoting unnamed sources saying hedge funds might seek to oppose the Centene-Wellcare deal.
- Shares of the St. Louis-based managed care firm were up more than 6% on the reports on Monday. A Humana spokesperson could not be reached for comment.
- Some analysts remain skeptical of the Humana-Centene combination reports. SVB Leerink analysts said they "doubt it ever happens" and suggested Humana may instead purchase Molina or a smaller Medicaid plan.
Centene's WellCare buy would make it a formidable contender in government-sponsored health plans. Jefferies analysts at the time said the deal would make the combined company the "undisputed" leader in Medicaid managed care with more than 11 million members across the country. At the same time, it would more than double Centene's Medicare footprint.
Some reports have suggested the Centene-WellCare deal puts pressure on other competitors such as Humana. Humana investors were disappointed the company wasn't seeking a Medicaid play, according to Barron's.
Medicare Advantage is core to Humana's business, as the second-biggest provider of MA plans behind UnitedHealthcare.
On the most recent earnings call with investors, SVB Leerink analyst Ana Gupte asked about Humana's Medicaid strategy in light of the Centene-WellCare deal.
Humana CEO Bruce Broussard said he remained confident in the company's "organic direction" and said "we are always looking at the market and the M&A side like no different than we have in the past," according to a call transcript.
Analysts noted that other options besides Centene are available, such as Molina or a smaller Medicaid plan. SVB Leerink does not believe Humana will stage a hostile takeover. Centene CEO Michael Neidorff "is a buyer, not a seller," SVB Leerink added, pointing to a string of Centene's acquisitions over the years.
Centene did not respond specifically to the Humana acquisition reports, but stood by its current plans.
"We remain as committed to our combination with WellCare today, as we did when we announced it on March 27. The addition of WellCare is an important step in our growth strategy and will drive value for our collective shareholders over the short and long-term," Marcela Hawn, Centene spokeswoman, said in a statement to Healthcare Dive.
Insurers such as Centene continue to profit from government-sponsored plans. Centene's first quarter revenue jumped 40% to $18.4 billion compared with a year earlier, while earnings rose 53% to $522 million, or $1.24 per share.
But the WellCare deal is not without challenges. Hospitals are calling for an antitrust review by the Department of Justice. Centene has acknowledged that divestitures are likely in Missouri and Nebraska.
Insurers are increasingly seeking deals that bulk up their size and scale while diversifying offerings.
In the past few years the industry has recorded landmark deals, including CVS' $69 billion purchase of Aetna and Cigna's $67 billion blockbuster buy of Express Scripts. The deals not only increase size and scale but pair pharmacy benefit managers under the same roof as traditional health insurance carriers.