JPM20: Centene's Neidorff on what gets his 'blood boiling'

SAN FRANCISCO—If there were one message Centene CEO Michael Neidorff wanted to get across this week, it was that the company's growth isn't just from M&A.

Even though recent headlines have centered around the company's planned acquisition of WellCare, the majority of the St. Louis-based insurer's growth is organic, Neidorff said at the annual J.P. Morgan Healthcare Conference.

"Over the past 10 years, 64% of our growth has been organic growth," he said. "And $44 billion has been through organic growth. And you can see the number of new opportunities we entered there. It's clear that organic growth continues to be a focus for this company." 

Speaking after his presentation this week, Neidorff said part of the future financial health of the company is also coming from trying to think a little smarter about how the business is run. He discussed the company's Centene Forward initiative, an internal system in which the company began reviewing its cost structures after realizing there were more than 6,000 open positions. 

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Among those initiatives are investment in new technology and new systems for doing work, he said. "So we're going to be doing with AI and other systems things that all these people would be doing," he said.

"We're still adding people and growing new plans. But people need to be refreshed. They need to have new challenging work. The last thing we need is more of the same," he said. "I've run into companies that have not recognized it, and they get acquired and start cutting people; they have all this fat. I said: 'Let's do it do ourselves before it's necessary to do it.'"

He said the moves are not just about saving money but also investing in better ways of doing their work. With the help of an AI system, one individual can look at 25 million records in three minutes and identify members who are at increased risk of, for instance, a coronary event.

"Now that's energy and money well spent. We can avoid a heart attack or a coronary event and identify other risks and tell the doctor," he said. "If we can do that, that's how you contain costs. But you also get better outcomes. The highest quality is lowest cost. That's what we want to do. That's what gets my blood boiling."

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When asked about many of the Democratic presidential candidates' support for "Medicare for All," Neidorff said the idea is just unrealistic and "divisive." 

"I call it a political sound bite," he said. "There's no way this country or any country right now could afford the switch they are talking about making. The estimates from the government are $25 [trillion] to $38 trillion over 10 years on a budget that's estimated to be $56 trillion. You think about adding that to the budget. It's too high and needs to be controlled in itself."

He also said the idea would be a source of divide in the U.S. by creating a two-tiered system of coverage: those on the public system and those who could afford private coverage. "We're divided enough as a country. Let's find ways to put it together versus creating more social and economic divides." 

He said the country needs to move from politics back to policy. 

"We have to identify things that can divide us more and eliminate them so we can go back. Too many people got left behind in '08, '09. And that’s where the populace is moving. My single biggest concern as a country is livable wages. If we had a $20 minimum wage, that’s $40,000 a year. Could you live on $40,000 a year, a family of three? That’s what we’re asking." Neidorff said. "That doesn’t mean you give everyone something for free. It doesn’t mean you take all the money from the wealthy. It means you start to work to get the productivity in the system. Think in terms of sound economic policy, not political policy."


When it comes to the WellCare acquisition, Neidorff told analysts not to be surprised if the $17 billion merger closes earlier than expected. 

"WellCare is moving along at a faster pace than what most people would expect," he said. "We have all the states signed off on our acquisition and the plans. And the states have now signed off on the Form Ds for the individuals buying the plans from us that we had to sell."

He said the company was in a position to begin integration by Jan. 1 and that it will be a smooth integration.

"We're now in a position to say year one will be no less than breakeven" instead of what was originally projected to be small single-digit losses, he said. "By the middle of the second year, upper single digits is still very achievable."