By Lauren Flynn Kelly
As Centene Corp. and WellCare Health Plans, Inc. prepare to create a “premier” government-sponsored health insurance entity, news emerged earlier this month that certain Centene shareholders may be seeking to block the deal in favor of selling Centene to a large company such as Humana Inc. Although Humana declined to comment on reports of a possible friendly takeover, industry experts say acquiring a major Medicaid provider would make sense for the insurer given increasing integration of Medicare and Medicaid.
Centene in late March said it planned to buy WellCare for approximately $17.3 billion. Reuters on May 6 reported that hedge funds Corvex Management LP and Sachem Head Capital Management LP are exploring challenging that acquisition; a report from StreetInsider followed that indicated Humana’s interest in pursuing a deal if Centene walked away from WellCare. But Centene spokesperson Marcela Hawn affirmed the company’s commitment to the transaction in an email to AIS Health.
The reported desire of Centene shareholders to have an “arranged marriage” with Humana is not necessarily surprising, given that Centene is the biggest player in Medicaid with a desire to grow its MA business, remarks Alex Shekhdar, founder of Sycamore Creek Healthcare Advisors. Such a deal would have less market overlap than Centene-WellCare and therefore involve fewer divestitures and an easier regulatory approval process, he suggests.
“This is all about duals, all about the interface of Medicare and Medicaid and the potential growth of MLTSS [managed long-term services and supports],” he says of a possible Humana-Centene combination.