Mergers & Acquisitions

Humana Will Buy One Primary Care Group — and Could Snap Up Another

Humana Inc. will spend between $450 million and $550 million in debt and cash to gain full control of a group of primary care clinics that it launched with private equity firm Welsh, Carson, Anderson and Stowe (WCAS), and company executives said during the firm’s recent investor day that Humana plans to double down on its existing primary care M&A strategy. Health care finance experts tell AIS Health, a division of MMIT, that insurers’ spending spree on providers is only likely to accelerate, but that Humana is in pole position to benefit from deep investments in Medicare Advantage-focused primary care.

Health insurers have spent billions to acquire outpatient providers since the onset of the COVID-19 pandemic. Finance experts tell AIS Health that the spending spree has two sources of capital. Carriers are spending huge cash reserves taken in during the deepest parts of the pandemic, which saw utilization plummet as premium revenues increased. In addition, Wall Street is bullish on managed care: Lenders are lining up to offer generous terms to acquisition-hungry insurers, which have enjoyed strong stock performance since the start of the pandemic era.

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News Briefs: Walgreens to Complete Acquisition of Specialty Pharmacy

Walgreens Boots Alliance, Inc. (WBA) will assume full control of specialty pharmacy Shields Health Solutions for approximately $1.37 billion cash, the firm said Tuesday. Walgreens already controlled the pharmacy, holding 71% of the company’s stock thanks to a $970 million deal that closed last year. WBA CEO Roz Brewer said in a press release that the deal will allow “further progress on our strategy through Shields’ integrated model, increasing our value to health systems, expanding access to payor partners and supporting improved outcomes and lower costs.”

Centene Corp. agreed to pay $165.6 million to the state of Texas over the state's contention that the insurer overcharged the state's Medicaid program for PBM services, according to legal documents obtained by Kaiser Health News (KHN). The settlement is the largest of a series of settlements from at least a dozen states over similar charges. The Texas settlement is the largest such arrangement, with Centene paying out at least $475 million so far to the states of Arkansas, Illinois, Kansas, Mississippi, New Hampshire, New Mexico, Ohio, Texas, and Washington; three other states have not released the value of their settlements with the Medicaid-focused insurer, per KHN. Centene has divested most of its PBM assets over the past year, and told investors in 2021 that it set aside $1.25 billion to wind down its liability to states in this area.

News Briefs: UnitedHealth, Walmart Ink Medicare Advantage Deal

UnitedHealth Group on Sept. 7 unveiled a “10-year, wide-ranging collaboration” with Walmart Inc., which will start in 2023 with 15 Walmart Health locations in Florida and Georgia. UnitedHealth’s Optum division will provide Walmart Health clinicians with “analytics and decision support tools” to help them improve outcomes for Medicare beneficiaries, and the two firms will offer a co-branded Medicare Advantage plan starting in January called UnitedHealthcare Medicare Advantage Walmart Flex (HMO-POS). Commercial health plan members with UnitedHealthcare’s Choice Plus PPO plan will also have in-network access to Walmart Health Virtual Care, effective in January. “Eventually, the collaboration aims to serve even more people, including those across commercial and Medicaid plans, by providing access to fresh food and enhancing current initiatives to address social determinants of health, over-the-counter and prescription medications, and dental and vision services,” stated a UnitedHealth press release.

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With Deal to Buy Trustmark, Health Care Service Corp. Continues Diversification Push

Health Care Service Corp. (HCSC) recently agreed to acquire Trustmark Health Benefits, a third-partner administrator (TPA) of health benefits. The pending deal continues HCSC’s expansion from its roots as primarily a traditional commercial insurer to other areas like TPAs and Medicare, and the diversification push is likely to continue, according to health insurance industry analysts who spoke with AIS Health, a division of MMIT.

For several years, HCSC has been a client of Trustmark Health Benefits, a firm that has more than 600 clients across the U.S. The companies Trustmark works with have self-insured health plans, meaning they are responsible for the cost of providing benefits to their employees. Trustmark generates revenue by helping companies in areas such as administering claims, managing risk, setting up virtual care and engaging with customers.

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News Briefs: Medicare Negotiation Will Cost Pharma Manufacturers

Moody’s on Aug. 19 released a report “stating that the drug pricing provisions in the Inflation Reduction Act of 2022 are credit negative for the pharmaceuticals industry, as the savings to the federal government and consumers will generally be borne by the industry,” the credit rating firm said. The most substantial impact on drug manufacturers will come from the IRA’s Medicare provisions, which the report observes are “estimated to save the US government $102 billion over 10 years. This cost will fall largely to the industry, as will the price curbing provisions and the reduction in the beneficiary out-of-pocket costs.” Moody’s also expects pharma’s early-stage transaction trend to accelerate: “One implication of the Inflation Reduction Act will be an increase in industry-wide acquisitions, as companies will seek ways to improve longer-term growth rates, given pressure on earnings growth that will result from the legislation. By acquiring companies with promising pipeline-stage products, pharmaceutical companies can increase the number of future drug launches to drive higher earnings.”

Inclusa Deal Will Give Humana Greater Foothold in Wisconsin, Medicaid

Fresh off of touting its organic Medicaid growth during its second-quarter 2022 earnings call, Humana Inc. recently unveiled an acquisition that will help the insurer grow its Medicaid business inorganically as well. Industry analysts say it’s a sound strategic move, but they add that Humana’s growing Medicaid assets aren’t likely to eclipse its focus on Medicare Advantage anytime soon.

The Louisville, Ky.-based company said on Aug. 12 that it will purchase substantially all the assets of Inclusa, which provides long-term services and supports to about 16,600 older adults and adults with disabilities through Wisconsin’s Family Care program. Humana already has a Medicaid presence in Wisconsin, having purchased the insurer iCare there in 2020.

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Mississippi Medicaid Plays Musical Chairs With MCOs, Trades UHC for CareSource Affiliate

Despite a challenge earlier this year to its longstanding pact with Mississippi Medicaid, Centene Corp. on Aug. 10 said its Magnolia Health Plan subsidiary was selected to continue serving the Mississippi Coordinated Access Network (MississippiCAN) and the Mississippi Children’s Health Insurance Program (CHIP). Meanwhile, the state’s Division of Medicaid (DOM) unveiled its intent to award new four-year contracts to two other insurers, including new entrant and CareSource affiliate TrueCare, which will bump leading managed care organization UnitedHealthcare out of the market.

Centene over the past year has reached multiple settlements with states regarding its handling of Medicaid pharmacy benefits. In June 2021, the health care giant agreed to pay $55.5 million to Mississippi after a 2019 investigation by the Office of the State Auditor concluded Centene’s pharmacy benefit manager was overbilling the state.

News Briefs: Individual Medicare Advantage Enrollment Surpasses 24.7 million, Up 9% Year Over Year

Individual Medicare Advantage enrollment this month surpassed 24.7 million lives, reflecting 9.3% membership growth since last August, according to a Barclays analysis of CMS’s latest monthly enrollment report. The publicly traded MCOs saw year-over-year individual MA membership grow by 10.5%, with Centene Corp. and CVS Health Corp.’s Aetna delivering double-digit enrollment gains, according to the analysis. Cigna Corp., however, underperformed with a year-over-year membership decline of 5.5%, observed Barclays. CMS’s August data release reflects enrollments accepted through July 8.

Highmark Wholecare has partnered with Posit Science to incorporate “brain fitness” into a program aimed at reducing vulnerable members’ risk of falling and improving balance. Highmark Wholecare, formerly Gateway Health, will offer BrainHQ exercises and services to approximately 7,000 qualifying members who are dually eligible for Medicare and Medicaid and identified as a high risk for falls. BrainHQ’s evidence-based brain fitness program is available via web or mobile phone and is supported by more than 200 peer-reviewed studies, according to an Aug. 15 press release from the partners.

News Briefs: UnitedHealthcare Unveils Rebranded ‘Surest’ Plans

UnitedHealthcare is rebranding a type of employer-sponsored plans previously known as Bind, promising “a new approach to health benefits that removes deductibles and provides clear upfront pricing information to people in advance of treatment.” Now known as Surest, the products are available to self-funded employer plans nationwide and fully insured customers with 51 or more employees in 11 states. The insurer aims to add up to five additional states where self-funded customers can access Surest plans by the end of the year, and notes that more than 150 employers are already using Surest.

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CVS May Join Insurers’ Home Health Care M&A Spree

CVS Health Corp. is on the verge of making a bid on home health care provider Signify Health, Inc., according to an Aug. 7 report from the Wall Street Journal. Health care insiders tell AIS Health, a division of MMIT, that CVS’s rumored move — part of a planned $25 billion transaction spree — accelerates an existing trend of diversifying health care firms buying their way into home care, even as the rate of transactions in the space slows.

CVS, the parent company of Aetna, is just the latest national health insurance firm with designs in the home care market. As the deal has not been announced, terms have not been disclosed, but Signify’s market capitalization is north of $4.5 billion, per the Journal. UnitedHealth Group, the multi-hyphenate parent company of insurer UnitedHealthcare, announced a $6 billion cash bid for home care provider LHC Group, Inc. in June.

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