- As part of re-examining its portfolio, Centene said it's "evaluating strategic alternatives for its international business," in a statement released Friday. Centene has previously disclosed that it's looking to divest "non-core assets" as it looks to up its profit margin.
- During an investor day presentation on Friday, Centene executives highlighted two international businesses that are under review, Circle Health in the U.K. and Ribera in Spain. Both operate hospitals and together generate more than $2 billion in revenue.
- As Centene continues to analyze its portfolio, executives said they have set up a framework for review that includes asking key questions about each asset, like, "Are we the best owner?" Recently, Centene sold its majority stake in U.S. Medical Management, a home care provider, in a deal that illustrates the portfolio review process at work, executives said Friday.
Centene is already underway on its long-term plan to boost profit margin, which the company is dubbing the value creation plan.
During Friday's discussion, executives highlighted the ongoing work within the "value creation office" made up of three top executives: Sarah London, vice chairman; Brent Layton, chief operating officer; and Drew Asher, chief financial officer.
Over the past few months, the office has "engaged with and analyzed every part of the organization," London said, including meeting in-person with the leadership teams of every unit and health plan.
The office has identified areas in which it expects to extract savings and expand its margin. For example, Asher said the company expects to generate $700 million in savings by trimming general and administrative expenses through centralizing certain functions. That could include consolidating its call centers and cutting back its real estate footprint by nearly 25% as the company embraces a hybrid at-home work model, a lesson from the pandemic.
To help improve margin, the company will also no longer operate a pharmacy benefit manager with three platforms in-house. It plans to bid out its PBM business, starting with putting out an RFP in 2022. Centene spends a whopping $35 billion on pharmacy each year for its members.
Part of the value creation plan includes selling non-core assets. It appears the international business units, Circle and Ribera are under consideration next.
Circle is the largest operator of independent hospitals in the U.K. with 50 hospitals and 1,900 beds. Circle's revenue represents two-thirds of international business revenue, Centene said.
Ribera operates 10 hospitals with 1,650 beds and 71 outpatient centers. It caters to both government and private pay patients.
Centene's investor day came amid reports that it's facing pressure to shake up its board from an activist investor, Quentin Koffey, who leads Politan Capital Management.
"There was no update regarding its ongoing board 'refresh', nor negotiations with activist Politan Capital Management," Cowen analysts said in a note following Friday's presentation.