Here's how Centene is thinking about M&A as it tackles its value creation plan

Over the past year, Centene has been hard at work on a value creation effort that aims to grow its core health plan businesses.

A part of that work has been taking a critical eye to other segments of the company to determine which are the most valuable assets to continue building up those core elements. For example, the government insurance giant has decided to oust the pharmacy benefit management business, and as such announced the sale of two subsidiaries to a private equity firm last week.

Although the company is considering strategic divestitures, it doesn't mean that acquisitions are fully off of the table, Chief Financial Officer Drew Asher said Tuesday during a session at the Bank of America Securities Healthcare Conference.

He said the company is thinking in an "asset-specific" way about which segments make the most sense to shed. PANTHERx, for example, is a rare pharmacy business that the team determined was not crucial to the focus of bolstering the health plan business.

"For us, it was more of a nice to have than a must-have," Asher said.

CEO Sarah London said during the session that while PANTHERx represented a strong "growth engine" overall, the business was not driving enterprise value. Centene acquired PANTHERx in 2020.

Asher said that while Centene is not looking at large-scale acquisitions for now, such as its $17.3 billion buy of rival WellCare Health Plans, it is considering potentially smaller deals that could benefit its value-creation agenda. In addition, the company sees the potential to better integrate assets it has acquired recently.

"We're not out of the M&A game," Asher said.

In addition to thinking differently about mergers and acquisitions, Centene has not ruled out investments in noncore businesses if they could pay off as part of the broader value-creation initiative, executives say.

An example of this is Community Medical Group, a Florida-based provider the insurer acquired in 2018. Asher said the company is taking a close look at ways the provider group could prove critical to boosting the core health plan business.

London said the insurer decided this year to invest further in CMG with the goal of potentially bringing its care model to additional markets.

"We are making sure we're making targeted investments," she said.