Dive Brief:
- Centene reported a strong second quarter Tuesday with a $169 million profit on $10.9 billion of revenue, a significant increase from the $88 million profit on $5.5 billion of revenue it saw during the same quarter last year.
- The company also increased its earnings projections for the remainder of 2016.
- At the same time, however, Centene's stock price took a dive closing at $68.86 per share from $72.49 per share at open of business due to concerns around major losses from the individual ACA plans of Health Net, which Centene acquired shortly before the end of the first quarter.
Dive Insight:
The Health Net issue arose from both the ACA plan losses as well as Centene having to set aside $300 million to account for future underperformance of health plans in several states, Bloomberg reported, noting Centene's year-to-date stock increase was at 14% coming into the day but went down to about 4.5%, losing 10% of its year-to-date gain in "a very bad day" for shareholders.
The matter will continue to impact Centene's strategy going forward, with the company planning to leave a “considerable amount” of its exchange business in Arizona in 2017, Modern Healthcare noted, adding that executives claim price hikes and benefit design changes will resolve the problems for 2017.
“We believe we have effectively addressed these concerns,” Modern Healthcare quoted Centene CEO Michael Neidorff on its investor call Tuesday. “They are manageable.”
Also during the Tuesday earnings call, Centene responded to rumors that the company is eyeing possible Humana/Aetna divestitures with a firm no. CEO Michael Neidorff said Centene “has not participated and will not participate in bidding and auctions," Forbes reported. Even if the deal, which is currently being fought by the DOJ, should go through and require sales to reach a settlement, Centene is not in a position to take on the level of Medicare business that could become available, he indicated.