- Centene has entered into a definitive agreement to acquire Phoenix, Arizona-based Magellan Health for $2.2 billion, or $95 per share, the payer said Monday. Magellan will operate independently under the Centene umbrella.
- Executives said the combination will result in one of the nation’s largest behavioral health platforms as the two will provide behavioral services to about 41 million members in the U.S.
- The deal also boosts Centene’s already established footprint in government sponsored health plans with the addition of 5.5 million lives and another 2.2 million to add to its pharmacy benefit management platform.
The deal is designed to boost Centene’s ability to market a “whole health” approach for its members. The COVID-19 pandemic has underscored the need to care for more than just a member’s physical health by also caring for their mental health, the company said Monday.
“This has become even more evident in light of the pandemic which has driven a dramatic rise in behavioral health needs,” Centene CEO Michael Neidorff said in statement. Both boards unanimously approved the deal.
Magellan Health provides managed care and pharmacy services for an array of clients that include health plans, unions and third-party administrators. Centene has been a client of Magellan’s in years past.
Magellan leans on analytics and other technologies in an attempt to improve health outcomes and lower costs. In addition to behavioral health, Magellan focuses on high-cost or complex patients for its clients. In its presentation to investors on Monday, Centene said 71% of total healthcare costs in the U.S. are spent on complex patients, illustrating the need for the deal.
For its healthcare management services, Magellan typically enters into risk-based contracts with its clients where it assumes all or a substantial portion of the risk in exchange for a per member, per month fee. Or, Magellan will enter into an administrative services only agreement in which it reviews utilization and claims administration and manages provider networks, according to its latest 10-Q filing.
The deal is expected to close in the second half of the year pending regulatory approvals. CEO Ken Fasola and other Magellan executives will continue their leadership roles.
Last year, Centene completed its blockbuster acquisition of rival WellCare, a $17 billion deal that catapulted the company to the fourth-largest insurer by membership when including Aetna, which is now part of CVS Health. The deal also doubled Centene’s Medicare Advantage footprint. Centene’s core business is Medicaid managed care and it is the largest insurer on the Affordable Care Act exchanges.