Health Plan Companies Start New Year M&A Activity With a Bang

By Clive Riddle, January 8, 2021

The first week of the new year witnessed a flurry of merger & activity from health plan companies, highlighted by the continuing diversification trend in which many such organizations can’t really be labeled just a health plan company anymore.

UnitedHealth Group’s Optum has acquired Change Healthcare. We are told “Change Healthcare will join with OptumInsight to provide software and data analytics, technology-enabled services and research, advisory and revenue cycle management offerings.” The agreement calls for the acquisition of Change Healthcare’s common stock for $25.75 per share in cash and is expected to close in the second half of 2021.

In a statement, Andrew Witty, President of UnitedHealth Group and CEO of Optum commented “together we will help streamline and inform the vital clinical, administrative and payment processes on which health care providers and payers depend to serve patients. We’re thrilled to welcome Change Healthcare’s highly skilled team to create a better future for health care.” Neil de Crescenzo, President and CEO of Change Healthcare, who will serve as OptumInsight’s chief executive officer, added "this opportunity is about advancing connectivity and accelerating innovations and efficiencies essential to a simpler, more intelligent and adaptive health system."

Centene Corporation announced they will acquire Magellan Health for $95 per share in cash for a total enterprise value of $2.2 billion. We are told the transaction "will broaden and deepen Centene's whole health capabilities and establish a leading behavioral health platform," with the Magellan Health CEO and management to remain in leadership roles. Centene summarizes the additional benefits of the merger as including: a combined platform to deliver better health outcomes for complex populations through the integration of physical and mental health care; an important addition to Centene's Health Care Enterprises, under which Magellan Health will continue to operate independently; creation of a next generation behavioral health platform, aligned with Centene's technology strategy with additional growth opportunities in specialty care and pharmacy.

In a statement, Michael F. Neidorff, Chairman, President and Chief Executive Officer of Centene commented "This acquisition accelerates our diversification strategy and enhances our ability to build next generation capabilities in our specialty care business by leveraging our scale and investments in technology. Furthermore, we are very familiar with the range of Magellan Health's healthcare solutions as we have been one of their customers over many years.”

Molina Healthcare, Inc. announced that its acquisition of the Magellan Complete Care line of business of Magellan Health, Inc. closed on December 31, 2020. Magellan Complete Care serves approximately 200,000 members. The transaction helped clear the way for Centene's acquisition of Magellan Health.

Harvard Pilgrim Health Care and Tufts Health Plan announced their organizations have formally combined, effective January 1, 2021, having received all regulatory approvals. Tom Croswell , head of Tufts will serve as CEO for the combined organization, and Michael Carson, head of Harvard Pilgrim, will serve as President. We are told that "while Tufts Health Plan and Harvard Pilgrim Health Care are officially one organization, both heritage brands and products will remain in the market for a period of time, and the benefits, programs and services its members rely on will not change in 2021 as a result of the combination.  The new organization’s headquarters will be located in Canton, MA; move in is slated to begin in Q4 of this year.  The new organization also anticipates announcing its new name in the second quarter of 2021."

Smaller regional plans are at it as well. Physicians Health Plan of Northern Indiana  announced they acquired Core Benefits, Inc., effective December 31, 2020, to provide additional reach into the third party administration (TPA) and employee benefits market. And Bright Health announced it has signed an agreement to acquire Central Health Plan of California. Upon closing, Bright Health will serve approximately 110,000 individuals within its Medicare Advantage business.

What will the rest of January bring in the health plan M&A world, let alone the rest of 2021?