Industry Updates: Healthcare Mergers & Acquisitions Continue in Full Force
With many uncertainties facing the future of American healthcare, providers and payers are turning to Mergers & Acquisitions (M&As) to shore up their portfolios. In 2019, as in other recent years, we’ve seen several significant M&As in the healthcare industry. This includes both regional and national mergers.
Here’s a roundup of major M&A news:
Centene-WellCare Merger Receives Shareholder Approval
In March, Centene and WellCare announced a plan to merge. Shareholders of both companies overwhelmingly approved the merger in a June vote. This is one of many steps of the process, but there is reason to think that the merger will happen relatively quickly. In July, WellCare told investors that it expects the deal to go through sooner than expected.
The deal must be approved by the Department of Justice, as well as regulators in 26 states. Several states have already approved the merger. If approved, the newly merged organization would cover 22 million Americans in Medicare Advantage, Medicaid, and health insurance exchange plans provided through the Affordable Healthcare Act.
Centene, a payer which has long been known for administering Medicaid plans, intends to expand its Medicare Advantage offerings through the acquisition. The company will also enter the Nevada market for the first time, while also entering new counties in states where it is already established. Although there have been rumors that Centene competitor Humana intended to acquire Centene, Humana said in June that no such acquisition is planned.
Harvard Pilgrim Health Care and Tufts Health Plan Announce Plans to Merge
This August, Harvard Pilgrim Health Care and Tufts Health Plan announced their plans to merge. If the merger goes through, it will form one of the largest nonprofit health service organizations in New England. The move will impact around 2.4 million people in Massachusetts, Maine, Connecticut, New Hampshire, and Rhode Island.
Currently, the proposed merger is under review by the office of Massachusetts governor, Charlie Baker. Attorney General Maura Healey will also play a role in reviewing the plan for the merger. It’s also likely that federal regulators will become involved in the deal.
If approved, the merged organization will offer employer-sponsored health plans, Medicare and Medicaid plans, and plans for people who are dually eligible for Medicare and Medicaid. The new organization does not yet have a name.
Tufts and Harvard Pilgrim are two of the largest payers in Massachusetts, aside from Blue Cross and Blue Shield of Massachusetts. The proposed merger would enable them to exert more leverage over the state’s healthcare system and better compete with both Blue Cross and national health plans.
In recent years, Harvard Pilgrim has seen a decline in membership, while the number of Tufts enrollees has increased slightly. A merger between the organizations was proposed in 2011, but leaders determined that it wouldn’t be advantageous at that time.
While the Harvard Pilgrim-Tufts merger is an example of a horizontal merger, some experts believe it could set the groundwork for a vertical merger in the future.
UnityPoint Health and Sanford Health of South Dakota Announce Intent to Merge
UnityPoint Health announced in June that the organization intends to explore a merger with Sanford Health of South Dakota. UnityPoint, based in DesMoines, Iowa, has 32 hospitals and 280 clinics across Iowa, Illinois, and Wisconsin. Sanford Health is based in Sioux Falls, South Dakota. It holds 44 hospitals and more than 200 senior care clinics in 26 states.
If the merger were to go through, the combined system would have an annual operating revenue exceeding $11 billion. The system would be among the fifteen largest nonprofit health systems in the U.S. The proposed merger needs to be reviewed by the Federal Trade Commission (FTC) and approved by the systems’ boards.
The organizations have stated that they plan to form a unified governing board while also enabling the medical groups to continue existing operations and relationships. The proposed merger is part of a larger trend towards the consolidation of hospital systems and provider networks.
Health Alliance Plan Will Acquire Trusted HP-Michigan
Health Alliance Plan, a Detroit-based managed care company, will acquire Trusted HP-Michigan, a Medicaid plan. Currently, HP-Michigan has around 9,000 enrollees in Wayne County.
Trusted HP-Michigan has been losing money in recent years. In 2018, it reported a net loss of $3.6 million on revenues of $26.9 million. The plan, which was originally the Harbor Health Plan, was sold to Trusted Health Care early in 2017.
For Health Alliance Plan, the acquisition will enable them to serve Medicaid enrollees in Detroit. Although HAP currently offers Medicaid plans, they are outside of Wayne County. Currently, HAP only serves dual Medicaid/Medicare enrollees in the county. HAP lost much of its Medicaid business in 2015 when the state reduced the number of Medicaid plans.
HAP is the health plan subsidiary of the Henry Ford Health System. It currently serves 570,000 beneficiaries across Michigan. The acquisition demonstrates that many large payers are eager to expand Medicaid offerings.
Much about the future of the American health industry remains uncertain, but it is clear that the trend towards M&As isn’t going away any time soon.