Centene's $17.3B Acquisition of WellCare would Affect Medicaid Market
by Jonathan LaMantia Crain’s New York Business March 27, 2019
Centene Corp., which entered the New York market last year through its acquisition of Fidelis Care, said Wednesday it would acquire another prominent Medicaid insurer with local ties, Tampa-based WellCare Health Plans.
St. Louis–based Centene would pay about $17.3 billion, including debt, for WellCare in cash and stock, giving its shareholders a 71% stake. Centene has offered 3.38 shares of its stock and $120 cash per share of WellCare, a 32% premium on WellCare's closing price on Tuesday, Modern Healthcare reported Wednesday morning.
Nationwide, the insurers would cover 22 million people through Medicaid, Medicare and Affordable Care Act plans. The combined company would have $97 billion in revenue this year on a pro forma basis. Centene's share price fell 5%, to $52.12, on Wednesday, while WellCare's rose 12.3%, to $259.81, at market close.
Both health plans have benefited immensely from the Affordable Care Act's expansion of Medicaid eligibility and creation of subsidies to help people with lower incomes buy health insurance, which have helped fuel enrollment.
Last year St. Louis–based Centene closed on its nearly $3.8 billion purchase of Rego Park–based Fidelis Care, the state's largest Medicaid and Affordable Care Act insurer. The Catholic Diocesan Bishops of New York State, which had previously run Fidelis, used $3.2 billion in proceeds from the sale to form the Mother Cabrini Health Foundation, making it one of the city's largest charities.
The combined insurer would add WellCare's 106,000 Medicaid managed-care members to Centene's Fidelis, which has 1.2 million Medicaid members statewide. In all, 4.3 million of the more than 6 million with Medicaid coverage statewide are covered by private plans.
Centene is negotiating a 500,000-square-foot lease at 1 Court Square in Long Island City that would partially fill a hole left by Amazon's reversal of its plan to move to Queens, Crain's reported last week. It's unclear whether WellCare would maintain its office at 1 New York Plaza in the Financial District.
John Burke, who leads WellCare's New York operation, told Crain's in 2016 that he was focused on growing the local plan's Medicare and Medicaid businesses and forming contracts with doctors that would be paid based on the quality of care they provide, not their quantity of visits and procedures.
WellCare acquired Aetna's prescription drug plan last year at the behest of federal regulators scrutinizing the latter insurer's acquisition by CVS Health.
Centene's purchase would require approvals from shareholders and state regulators. The companies expect the deal to close in the first half of next year if those conditions are met.