AHA calls for DOJ scrutiny of Centene acquisition of WellCare

U.S. Justice Department
In a letter to the assistant attorney general, American Hospital Association officials said they were urging close scrutiny from the U.S. Justice Department's antitrust division because the deal "threatens to reduce competition." (Coolcaesar/Wikimedia)

The American Hospital Association is urging the Department of Justice to "fully investigate" Centene Corporation's planned $17.3 billion acquisition of rival insurer WellCare Health Plans.

Should the deal—announced in late March—be finalized, it would create one of the largest sponsors of government plans across the three main markets: Medicare, Medicaid and the Affordable Care Act exchanges,

In a letter to the assistant attorney general, AHA officials said they were urging close scrutiny from the DOJ's antitrust division, because the deal "threatens to reduce competition in delivery of Medicaid Managed Care and Medicare Advantage services to tens of millions of consumers across broad swaths of the country."

Multiple states such as Illinois, Florida, Georgia and Kentucky would see more than half of their of their market collectively controlled by the two companies, the letter points out.

RELATED: Centene to purchase WellCare in $17.3B deal

Post-merger, the joint company would also be the fourth-largest payer in the private Medicare space, including Medicare Advantage, supplemental coverage and Part D plans, their officials told investors during the announcement about the acquisition. The joint company would include 22 million members across all 50 states and combined estimated revenues of $97 billion in 2019. Centene and WellCare estimate that merging will create $500 million in cost synergies in the joint company's second year, bolstered by a greater scale in the government business.

A statement from a Centene spokesperson said the combined company would "enhance competition" and better be able to serve members and achieve better health outcomes.

"The combined company will provide access to more comprehensive and differentiated solutions with a continued focus on affordable, high-quality, culturally-sensitive healthcare services," the statement said.  "The combination would create a company comparable in size to the other three large companies that service government contracts."

Centene also said there are multiple other companies within specific markets. "We look forward to working through the transaction process so we can bring the benefits of our combined company to the communities in which our members live and work," the spokesperson said in the statement. "It is an irony that the AHA would be concerned about this transaction considering the number of hospital consolidations that have taken place in recent years, and that are still taking place.”

RELATED: Centene reports 40% revenue boost in Q1 amid plans to purchase rival WellCare