Mergers & Acquisitions

CVS Health Corp. on Feb. 7 lowered its earnings per share (EPS) guidance for 2024, citing high Medicare Advantage cost trends. Wall Street analysts expected the announcement because other insurers, such as UnitedHealth Group and Humana Inc., previously mentioned MA costs as a potential drag on their profits. Meanwhile, The Cigna Group, reporting its fourth-quarter and full-year 2023 results on Feb. 2., increased its EPS guidance for this year and received favorable views from analysts.

CVS projects an adjusted EPS of at least $8.30 this year, down from its previous guidance of at least $8.50 that the company disclosed during its investor day on Dec. 5. The company had an adjusted EPS of $8.74 in 2023.

As of Feb. 1, at least 16.4 million Medicaid enrollees had been disenrolled from coverage since last April, representing about one-third of people who had applied to have their coverage renewed, according to KFF. KFF said the number of people disenrolled is likely higher “due to varying lags for when states report data.” Of the people who had been disenrolled, 71% were terminated for procedural reasons, meaning they did not complete the renewal process in time. The disenrollment rates ranged from 13% in Maine to 61% in Texas. Overall, states and Washington, D.C., have reported renewal outcomes for 52% of people enrolled in Medicaid, while the remaining 48% of people were awaiting decisions as of Feb. 1.

Dirk McMahon, UnitedHealth Group’s president and chief operating officer, plans on retiring, effective April 1. McMahon joined UnitedHealth in 2003 and has been president and COO since February 2021. UnitedHealth has not named a replacement for McMahon, whose previous roles at the company included CEO of UnitedHealthcare and president and COO of Optum.

Less than two years after Walgreens Boots Alliance Inc.’s purchase of Shields Health Solutions, the pharmacy giant is rumored to be seeking a sale of the health system-owned specialty pharmacy integrator, per a Jan. 23 Bloomberg article, which valued the company at around $4 billion. While returns from a sale could help the company shore up certain units, divesting itself of Shields at a time when specialty pharmacy continues to be a hot commodity may be a questionable approach, say industry experts.

A Walgreens spokesperson told AIS Health, a division of MMIT, that the company has no comment.

Capping off months of rumors that such a deal was brewing, The Cigna Group on Jan. 31 said it has agreed to sell its Medicare business to Health Care Service Corp. (HCSC). Industry observers say that given the near-term headwinds Medicare Advantage is facing, it’s wise for Cigna to leave a market in which it struggled to compete and focus on more promising growth opportunities.

The $3.7 billion purchase will transfer nearly 600,000 Medicare Advantage members, more than 450,000 Medicare Supplement lives and 2.5 million Medicare Part D lives from Cigna to HCSC, the companies said. The Blue Cross Blue Shield licensee will also acquire Cigna’s CareAllies business, which offers “management services to support value-based care arrangements” and works with providers to form accountable care organizations and independent physician associations.

After reportedly vying with Elevance Health, Inc. for the purchase of The Cigna Group’s Medicare Advantage business, Health Care Service Corp. (HCSC) will buy Cigna’s MA, Medicare Supplemental, Medicare Part D and CareAllies assets for a total transaction value of $3.7 billion. HCSC has been aggressively growing its MA business through service area expansions; the addition of Cigna’s MA lives would boost its current share of the segment from 0.62% to 2.40%, according to AIS’s Directory of Health Plans.

In a press release unveiling the deal, the Chicago-based insurer said the acquisition will accelerate its growth in “an important market segment” and “bring many opportunities to HCSC and its members — including a wider range of product offerings, robust clinical programs and a larger geographic reach.” HCSC is customer-owned, meaning policyholders and not stockholders are the owners, and it is an independent licensee of the Blue Cross and Blue Shield Association. Its Blues plans currently enroll 204,638 members across five states: Illinois, Montana, New Mexico, Oklahoma and Texas.

The Biden administration on Jan. 25 released a Request for Information to seek feedback about the best way to enhance Medicare Advantage data capabilities and increase public transparency. In a press release, HHS pointedly noted that “transparency is especially important now that MA has grown to over 50% of Medicare enrollment, and the government is expected to pay MA health insurance companies over $7 trillion over the next decade.” To that end, the agency said it’s seeking data-related input on aspects of the MA program including access to care, prior authorization, provider directories and networks, supplemental benefits, marketing; care quality and outcomes, value-based care arrangements and equity, and “healthy competition in the market, including the effects of vertical integration and how that affects payment.”

Elevance Health, Inc. reported stronger results for its 2023 fourth quarter earnings than its other publicly traded managed care peers so far, driven by relatively low utilization across its diverse mix of business lines. The results received positive reviews from Wall Street analysts, who contrasted the strong results with other carriers’ struggles.

Elevance, the for-profit Blue Cross and Blue Shield affiliate formerly known as Anthem, experienced lower care utilization than other managed care heavyweights like UnitedHealth Group and Humana Inc. — something that analysts were quick to note in their coverage of Elevance’s results. Elevance has substantive business in commercial insurance, Medicare and Medicaid.

The annual J.P. Morgan Health Care Conference in San Francisco, which took place from Jan. 8-11, has a well-earned reputation as the site of dealmaking. Last year, for example, rumors of CVS Health Corp.’s eventual deal to acquire primary care provider Oak Street began to emerge.

The 2024 edition proved to be less fruitful for dealmaking as far as managed care firms were concerned — never mind the $6.4 billion in deals announced at the start of the conference by Johnson & Johnson, Merck & Co. Inc. and Boston Scientific Corp.

Still, CVS and The Cigna Group each faced questions about the aftermath of megadeals, both real and imagined.

Although executing mergers and acquisitions (M&A) is an important part of health insurers’ growth toolkit, industry insiders tell AIS Health, a division of MMIT, that companies could face challenges completing deals in 2024 due to factors such as high interest rates and government intervention.

The Federal Trade Commission (FTC) and Department of Justice (DOJ) last month finalized updated merger guidelines for the first time since 2020. The FTC and DOJ noted the guidelines “are not themselves legally binding, but provide transparency into the Agencies’ decision-making process.”

Law firm Morgan Lewis wrote in a Dec. 21 brief that the FTC and DOJ are “dramatically expanding the number and type of transactions that the agencies will consider presumptively unlawful,” although the authors noted that the agencies have both “lost several merger cases in the last few years.”

Elevance Health, Inc. has agreed to acquire infusion services provider Paragon Healthcare, Inc., the health insurer said Jan. 4. The companies did not disclose financial details of the deal, which is expected to close in the first half of 2024. Paragon Healthcare serves more than 35,000 people at more than 40 ambulatory infusion centers in eight states, as well as in the home setting, and it treats more than 300 conditions. Once the deal is finalized, Paragon Healthcare will operate as part of CarelonRx, which is the pharmacy segment within Elevance Health’s Carelon health services division. The deal follows Elevance Health’s acquisition of BioPlus, a specialty pharmacy subsidiary of CarepathRx, a portfolio company of Nautic Partners, which it closed in February 2023.

Hizentra (immune globulin subcutaneous [human] 20% liquid) is now available in a 10 g prefilled syringe, manufacturer CSL Behring disclosed Jan. 3. The agent is the first and only subcutaneous immune globulin treatment approved for the maintenance of chronic inflammatory demyelinating polyneuropathy in the U.S. It also is approved for primary immunodeficiency in people at least 2 years old. In addition to the new size, the drug also is available in 1 g, 2 g and 4 g prefilled syringes.