Centene completes acquisition of Magellan Health
The deal will allow for increased access to behavioral healthcare at a time when many are struggling, Centene says.
Photo: VioletaStoimenova/Getty Images
Centene Corporation has announced that it has completed its acquisition of Magellan Health, thereby enabling the health insurer to provide whole-health, integrated healthcare solutions, the company said this week.
The stated goal is that this will allow Centene to deliver better health outcomes at lower costs for complex, high-cost populations.
What Magellan will do, said company officials, is allow Centene to provide increased access to behavioral healthcare, citing the ongoing trend of Americans struggling with mental or behavioral health issues.
The transaction, said Centene Chairman and CEO Michael Neidorff, will provide a platform for innovation as the company looks to "reimagine" behavioral and specialty health. The goal is twofold: providing comprehensive and integrated healthcare, and generating value for partners and shareholders.
Magellan Health will operate independently under Centene's Health Care Enterprises umbrella. Ken Fasola, CEO of Magellan Health, and other members of Magellan Health's leadership team will continue to lead the organization.
Magellan Health common stock ceased trading prior to the opening of trading on January 4.
WHAT'S THE IMPACT?
Centene, a Fortune 25 company, offers products to nearly one in 15 Americans, including Medicaid and Medicare members and those served by the Health Insurance Marketplace and the TRICARE program, as well as individuals in correctional facilities.
The company also serves several international markets, and contracts with other healthcare and commercial organizations to provide a variety of specialty services.
THE LARGER TREND
Centene originally signaled its intent to snag Magellan in January 2021 in a deal valued at an estimated $2.2 billion.
Ultimately, the deal is expected to have several strategic and financial benefits, which come at a critical time, with more than two in 10 Americans struggling with mental or behavioral issues associated with the COVID-19 pandemic, according to the Centers for Disease Control and Prevention. Additional research shows that the sickest 5% of the population accounts for 50% of healthcare spending, which can be partially addressed by Megallan's behavioral health, specialty health and pharmacy offerings.
The transaction also brings additional scale in Centene's specialty-care division and complements its evolving Health Care Enterprises portfolio, aligned with delivering newer technologies and services across the full spectrum of its members.
The companies said the deal will enable better health outcomes at lower total medical costs via integrated solutions, and create opportunities to grow Centene's specialty care business with enhanced services, new product development and additional third party relationships.
Centene expects the transaction to deliver $50 million in annual net cost synergies projected by the second full year. The net synergies are in addition to the cost-reduction plan of $75 million already initiated by Magellan.
Centene intends to primarily fund the cash portion of the acquisition through debt financing, and J.P. Morgan has provided a $2.381 billion bridge-financing commitment.
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
