Centene CEO hints at Medicare acquisition, touts scalable clinic model

Business executives shaking hands
During an earnings call Tuesday, Centene CEO Michael Neidorff hinted at a possible Medicare acquisition. (Getty/Martin Barraud)

After closing a $3.75 billion deal with Fidelis Care earlier this month, Centene may have its sights set on another acquisition.

During an earnings call on Tuesday, CEO Michael Neidorff declined to comment on the Centene’s future plans for inorganic growth in the Medicare market but offered a vague addendum regarding the possibility of adding new plans.

“I really can’t talk too much about that,” Neidorff said in response to an investor question about tucking in Medicare plans. “That's from a competitive standpoint and all of the reasons associated with it. … Until a deal is done, it's not done. So, I want to be very cautious and conservative on that particular one.”

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Centene’s Medicare business covered 343,000 people at the close of the second quarter, up more than 16,000 from the previous year. Total revenues represent a smaller portion of the company’s overall portfolio, accounting for $1.2 billion of Centene’s $14.2 billion in revenues during the second quarter.

RELATED: Centene revenues up 19% following Fidelis purchase

Overall, company executives seemed unfazed by regulatory and industry shifts. Neidorff and others reiterated confidence in their risk-adjustment calculations, which have not changed despite the freeze by the Trump administration. Neidorff said he was “pleased to see” the Centers for Medicare & Medicaid Services (CMS) submit a rule to the Office of Management and Budget last week with a proposed fix to the program.

Chief Financial Officer Jeffrey Schwaneke said if CMS were to change the risk-adjustment formula to use carrier-specific premiums rather than the statewide average, the amount Centene owes would drop by about $100 million.

RELATED: Blues plans crushed by risk adjustment freeze as Kaiser skirts nearly $1B

With ACA plan offerings in 16 states, the company didn’t shy away from newcomers like Oscar and Bright that are expanding into new markets.

“We welcome the competition,” said Kevin Counihan, the senior vice president of products at Centene and the former CEO of Healthcare.gov. “We think that it's an example of the ongoing growth and stability of the marketplace.”

And while Centene joined the industry trend of buying up physician practices and medical clinics earlier this year, it doesn’t expect that to continue. Instead, the insurer plans to rely on its recent acquisition of Florida-based Community Medical Group to fill in providers in areas where there are fewer physicians.

“It gives us that opportunity to open up a clinic and do it efficiently and quickly,” Neidorff said.

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