Medicaid managed care specialist Centene nearly doubled its quarterly profit, wrapping its arms around more and more members while adding fuel to rumor fires about the next wave of takeovers.
St. Louis-based Centene brought in first-quarter earnings of $63 million, up 90 percent from the first quarter of 2014, and putting it on track to beat the $271 million in total net income last year. Revenue is also surging, 48 percent year-over-year, to $5.1 billion this past quarter, from Medicaid contracts, Medicare, long-term care, exchanges and CHIP.
"We had a strong start to 2015, delivering exceptional top and bottom line growth compared to last year," said Michael Neidorff, Centene chairman and CEO. "We continue to be successful in executing on our robust growth pipeline while maintaining operational discipline."
Centene now covers about 4.4 million Americans across 22 states--44 percent more than this time last year--mostly through government-sponsored programs.
Most of the membership is the 3.1 million beneficiaries in Medicaid managed care plans across 17 states, followed by 410,000 members in plans for Medicare, aged, blind or disabled individuals and dual eligibles, 233,000 in CHIP and foster care, 195,000 in behavioral health plans, 161,000 in public exchange plans and 71,000 in long-term care.
Centene's membership in Florida doubled, from 230,300 lives in Q1 2014 to 463,000 this year, and state eligibility expansion brought 331,800 more Medicaid members in in California, Illinois, Indiana, Massachusetts, New Hampshire, Ohio and Washington.
The company's medical benefit ratio, high as expected for publicly-funded at-risk plans, stood at 89.8 percent for the first quarter 2015, compared to 89.3 percent this time last year. Its general and administrative ratio, though, was lower, at 8.5 percent, compared to 8.8 percent in the first quarter 2014.
The company has started a number of contracts this year and is on track to win a few as well.
In February, Centene's Superior HealthPlan was tentatively recommended for a contract to keep serving Texas' STAR Health Medicaid foster care recipients. Also in Texas, Centene began operating under an expanded STAR+PLUS contract to include nursing facility benefits, and started a new federal-state contract serving dual-eligible members in three counties as part of a demonstration program.
In March, the company's Missouri subsidiary Home State Health won a renewed contract to continue serving MO HealthNet Managed Care beneficiaries, and in April the Indiana subsidiary Managed Health Services began an expanded contract for aged, blind and disabled Medicaid enrollees who qualify for the new Hoosier Care Connect Program. Opportunity may also knock in Indiana as the state expands Medicaid eligibility via its alternative HIP 2.0 program.
Centene recently began a new statewide contract in Louisiana that will more than double its revenue in the state to almost $1 billion, covering as many as 350,000 residents on a full-risk basis. The company also just inked a deal to acquire Agate Resources, which serves 87,000 Medicaid and 3,500 Medicare advantage beneficiaries in Oregon, which will be Centene's 23rd state of operation. (No word on the outcome of a lawsuit sparked by Centene's pull out of Kentucky's Spirit Health Plan.)
All which raises Centene's profile in the ongoing Wall Street speculation about managed care mergers and acquisitions in the latter half of this decade, with analysts expecting large companies to grow organically with the market and via takeovers.
Centene and the likes of WellCare, Molina and Health Net have been seen as possible acquisition targets by UnitedHealth Group, Aetna or Anthem. Some hypotheses outline a potential case for, say, Aetna to buy up its smaller Connecticut-based peer Cigna, or Anthem to acquire Humana. There's also a 967,000-member health insurance company up for sale right now.
But for Centene, the speculation runs both ways. The 31-year-old company, with 71-year-old Neidorff at the helm, could itself be a contender to acquire smaller rivals and expand in the Medicare Advantage market especially, according to Ana Gupte, a managing director at Leerink Partners.