Centene down $213 million in Q4 despite revenue gains
The increase in total revenues was driven by organic Medicaid growth and a 21% membership growth in Medicare, company says.
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Despite a 9% increase in revenue in the fourth quarter, healthcare payer Centene reported a $213 million net earnings loss during that period, falling short of Wall Street predictions, the organization revealed this week.
Centene posted $1.2 billion in profit for the year, down from the $1.3 billion it logged the previous year. Revenue, however, jumped from $126 billion to $144.5 billion during that same time, which the payer attributed to a "disciplined focus" in 2022.
The increase in total revenues, the company said, was driven by organic Medicaid growth, primarily due to the ongoing suspension of eligibility redeterminations, 21% membership growth in the Medicare business and its acquisition of Magellan, and was partially offset by the PANTHERx Rx Rare divestiture.
The health benefits ratio of 88.7% in the quarter is an increase from the 87.9% logged in Q4 2021. That's due to higher Medicaid utilization, higher flu costs and increased investments in quality, said Centene; it was partially offset by lower COVID-19 testing and treatment costs, as compared to the fourth quarter of 2021.
Cash flow used in operations for the fourth quarter of 2022 was $1.6 billion, driven by the early receipt of $2.9 billion in Centers for Medicare and Medicaid Services payments in September, the company said.
WHAT'S THE IMPACT?
For the full year, the health benefits ratio of 87.7% represents a slight decrease from the 87.8% logged in the comparable period in 2021. It was helped, said Centene, by "disciplined marketplace pricing" and 2021 risk adjustment recorded in 2022, partially offset by a return to more normal Medicaid utilization and higher flu costs compared to 2021. The year was also negatively impacted by unfavorable 2020 risk adjustment, the company said.
Cash flow provided by operations for the full year was $6.3 billion, or 5.2 times net earnings.
For the coming year, Centene expects an additional $1.5 billion of Medicaid premium revenue, reflecting a higher starting point in 2023 and an additional two months until redeterminations get back underway on April 1.
Centene also anticipates an additional $3 billion of commercial premium revenue from stronger-than-expected marketplace open enrollment; lower Medicare revenue of $500 million, due to softer-than-expected 2023 annual enrollment; and decreased revenues of $2 billion. That's due to the divestitures of Magellan Specialty Health, Centurion and HealthSmart, which were completed in January.
THE LARGER TREND
When Cigna announced its intent to sell Magellan Specialty Health to Evolent Health, the payer said it expected to receive over $750 million in aggregate proceeds, including potential earnout. It also anticipated receiving about $600 million in proceeds at closing, with at least $400 million paid in cash and the remainder paid in Evolent common stock.
In addition, Centene will receive up to $150 million in cash and Evolent common stock in 2024 if certain performance metrics are achieved.
The majority of the net proceeds from the sale will be used to repurchase stock and the balance to reduce debt, according to Centene. The transaction is expected to close in the first half of this year, and is expected to be neutral to Centene's Adjusted Earnings Per Share in the 12-month period post-closing.
Centene acquired Magellan Specialty Health, also known as NIA, in January 2022 as part of its acquisition of Magellan Health.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
