TAMPA — WellCare Health Plans’ $2.5 billion purchase this week of a Midwestern group of health plans — the biggest acquisition in the company’s history — is no fluke.
With a market capitalization of about $10 billion, WellCare is a Fortune 200 company and the second largest publicly traded company in the Tampa Bay area by market value. What’s more, it holds a respectable position nationally as the fifth largest manager of health care provided through Medicaid and the sixth largest manager for patients enrolled in the Medicare Advantage program.
Still, it is nowhere near the size of the titans of its industry like Humana (with a market cap four times as big), Anthem (formerly WellPoint, six times as big) or UnitedHealth Group (23 times as big).
"We don’t aspire to be the biggest company in the industry," WellCare CEO Ken Burdick told shareholders at the company’s annual meeting on May 23. But the company does have some ambitious business growth and service delivery goals, among them to build its revenues to $28 billion a year by 2021, double what they were in 2016.
So it is pursuing a multi-year plan to build revenue, membership and market share not only organically, but also through strategic acquisitions.
In late 2016 it picked up Care1st Health Plan Arizona for $157.5 million. Last year it acquired the Arizona Medicaid assets of the Phoenix Health Plan, then paid $800 million for Universal American, at the time its biggest acquisition ever.
Now comes Meridian, a well-regarded family-owned company based in Detroit. After the purchase was announced, Burdick described Meridian as "a business that I have admired for a long, long time" and saw as a good company to buy even before he came to WellCare in 2014.
"A compelling strategic fit for WellCare," Burdick told stock analysts on a conference call after Tuesday’s announcement.
Buying Meridian extends WellCare’s geographic range and adds to its base of Medicaid members, who account for about two-thirds of WellCare’s business. It is expected to add about 2,000 employees to WellCare’s workforce of 9,320.
It also brings in a pharmacy management operation that, while not a big part of WellCare’s business now, has the potential to help it improve its service in to Medicaid and Medicare Advantage patients, as well as to save money for the state and federal governments that pay the bills.
Meridian has about 1.1 million members, the vast majority of them in Medicaid, in Michigan and Illinois, where it is the largest Medicaid health plan in each state. Once the deal goes through, WellCare will become the No. 1 Medicaid membership company in six states, up from four currently.
WellCare’s Medicare Advantage program will gain an estimated 27,000 members and a presence in three new states — Indiana, Michigan and Ohio — extending its reach in that program to a total of 21 states.
WellCare also is acquiring Meridian’s pharmacy benefit manager, MeridianRx. Pharmacy benefit managers, or PBMs, run prescription drug coverage. Insurers have worked to build or buy these businesses to improve how they share data, manage care and control prescription drug costs. That’s led to a series of deals and initiatives:
• In March, Cigna Corp. announced it would spend $52 billion on Express Scripts Holding Co., one of the nation’s biggest PBMs.
• UnitedHealth Group, the nation’s biggest insurer, has created one of the biggest PBMs through its Optum business.
• Anthem, the insurer for Blue Cross-Blue Shield, is building a PBM with help from CVS Health Corp., which is buying the insurer Aetna.
Meridian built its PBM in-house seven years ago. Burdick said he expects acquiring MeridianRx to provide WellCare with insights into managing pharmacy costs and integrating pharmacy services and medical care — benefits that could help the company both deliver affordable care and lower its costs.
"It was more than just icing on the cake," Burdick said of getting the PBM, "but it wasn’t the first driver of our interest."
Along with enhancing its pharmacy capabilities and extending its reach, buying Meridian also is expected to bring WellCare opportunities for earnings growth and to boost revenues toward that 2021 goal of $28 billion.
WellCare projects Meridian will add more than $4.3 billion in revenue, for an estimated total of $22.9 billion this year.
If it hits that mark, WellCare will have come a long way from its founding in 1985 by a small group of local doctors, its ownership in the 1990s by Dr. Kiran Patel and from a Medicare fraud scandal in 2011 that resulted in one guilty plea and four jury verdicts against the former CEO, chief financial officer, general counsel and two vice presidents.
In his remarks to stockholders this month, Burdick foreshadowed the Meridian acquisition and indicated that WellCare has broadened how it will define success in the future.
"We are just getting started," he said. "We’re no longer focused on comparing our results to past WellCare results. We’ve now earned the right to compare ourselves to our very best competitors, and that’s what we plan to do."
This report includes information from the Associated Press. Contact Richard Danielson at firstname.lastname@example.org or (813) 226-3403. Follow @Danielson_Times