Centene Corporation CNC recently announced that it has completed its acquisition of substantially all the assets of Fidelis Care for a transaction worth $3.75 billion. With this buyout, the company would be able to establish its presence in the state of New York.
Fidelis Care, the leading government health plan provider in New York, would enable Centene to expand its nationwide dominance in government sponsored healthcare as well as enter New York, the country’s second largest managed care state in terms of membership. Centene will secure a leadership position across the country’s four largest managed care states including California, Texas and Florida, adding around 4,000 dedicated team members to its family. The transaction is effective Jul 1, 2018.
Both companies are dependent on each other for respective experience, industry knowledge of their officers and other employees for executing business plans. The companies are closely aligned on various levels and expect to provide a better, accessible and cost-effective healthcare to communities they serve. The two corporate entities would also be able to create a space in government sponsored healthcare programs in the state.
The acquisition will establish Fidelis in Obamacare, Medicaid and Medicare Advantage markets in New York. Medicare and Medicaid, the health plans for retirees are highly coveted by health insurers. Aging American population with baby boomers increasingly touching the retirement age on a daily basis act as a catalyst for heavily demanding Medicare Advantage, a private version of government sponsored plans.
Medicaid is the third largest domestic program in the federal budget after Social Security and Medicare and the share managed by private insurers is rising as states shift more of their Medicaid population to managed care plans.
These plans thus present a huge growth opportunity and players in the industry are vying for the same. Revenues from government business for UnitedHealth, Anthem, Aetna, Cigna, Humana have more than doubled since the passage of the Affordable Care Act (ACA).
Centene has always been dynamic and has widened its markets efficiently through mergers and acquisitions. In the past few years, the company grew its Medicaid membership and forayed into various international markets with consistent efforts. These inorganic endeavors are expected to boost the company’s top line in the coming years.
Shares of this Zacks Rank #3 (Hold) stock have soared 54.80% in the past year, outperforming its industry’s rally of 29.32%.
Key Picks
Investors interested in the Medical HMO can look into some better-ranked stocks like Molina Healthcare, Inc MOH, WellCare Health Plans, Inc. WCG and Humana Inc. HUM.
Molina Healthcare offers Medicaid-related solutions to meet the health care needs of low-income families and individuals. The stock sports a Zacks Rank # 1 (Strong Buy) and surpassed estimates in three of the last four quarters with an average earnings surprise of 112.27%. You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare provides managed care services for government-sponsored health care programs. The company holds an impressive Zacks Rank #2 (Buy) and came up with an average four-quarter positive surprise of 51.70%.
Humana operates as a health and well-being company in the United States. It carries a Zacks Rank of 2 and managed to pull off an average four-quarter beat of 6.16%.
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