We are a diversified, multi-national healthcare enterprise that provides programs
and services to government sponsored healthcare programs, focusing on under-insured
and uninsured individuals. We provide member-focused services through locally
based staff by assisting in accessing care, coordinating referrals to related
health and social services and addressing member concerns and questions. We
also provide education and outreach programs to inform and assist members in
accessing quality, appropriate healthcare services. We believe our local approach,
including member and provider services, enables us to provide accessible, quality,
culturally-sensitive healthcare coverage to our communities. Our health management,
educational and other initiatives are designed to help members best utilize
the healthcare system to ensure they receive appropriate, medically necessary
services and effective management of routine, severe and chronic health problems,
resulting in better health outcomes. We combine our decentralized local approach
for care with a centralized infrastructure of support functions such as finance,
information systems and claims processing.
On July 2, 2015, we announced that we had entered into a definitive merger agreement
with Health Net, Inc. (Health Net) under which we will acquire all of the issued
and outstanding shares of Health Net. Under the terms of the agreement, at the
closing of the transaction, Health Net stockholders (with limited exceptions)
would receive 0.622 of a validly issued, fully paid, non-assessable share of
Centene common stock and $28.25 in cash for each share of Health Net common
stock.
We operate in two segments: Managed Care and Specialty Services. Our Managed
Care segment provides health plan coverage to individuals through government
subsidized programs, including Medicaid, the State Childrens Health Insurance
Program (CHIP), Long Term Care (LTC), Foster Care, dual-eligible individuals
(Duals) and the Supplemental Security Income Program, also known as the Aged,
Blind or Disabled Program, or collectively ABD. Beginning in 2014, our Managed
Care segment also provides health plan coverage to individuals covered through
federally-facilitated and state-based Health Insurance Marketplaces (HIM). Our
Specialty Services segment consists of our specialty companies offering diversified
healthcare services and products to state programs, correctional facilities,
healthcare organizations, employer groups and other commercial organizations,
as well as to our own subsidiaries.
We provide our services primarily through Medicaid, CHIP, LTC, Foster Care,
ABD, Medicare and other state and federal programs for the uninsured. The federal
Centers for Medicare and Medicaid Services, or CMS, estimated the total Medicaid
and CHIP market was approximately $449 billion in 2013, and estimate the market
will grow to $890 billion by 2024. According to the most recent information
provided by the Kaiser Commission on Medicaid and the Uninsured, Medicaid spending
increased by 13.9% in fiscal 2015 and states appropriated an increase of 6.9%
for Medicaid in fiscal 2016 budgets.
Established in 1965, Medicaid is the largest publicly funded program in the
United States, and provides health insurance to low-income families and individuals
with disabilities. Authorized by Title XIX of the Social Security Act, Medicaid
is an entitlement program funded jointly by the federal and state governments
and administered by the states. The majority of funding is provided at the federal
level. Each state establishes its own eligibility standards, benefit packages,
payment rates and program administration within federal standards. As a result,
there are 56 Medicaid programs - one for each U.S. state, each U.S. territory
and the District of Columbia. Eligibility is based on a combination of household
income and assets, often determined by an income level relative to the federal
poverty level. Historically, children have represented the largest eligibility
group. Many states have selected Medicaid managed care as a means of delivering
quality healthcare and controlling costs. We refer to these states as mandated
managed care states.
Established in 1972, and authorized by Title XVI of the Social Security Act,
ABD covers low-income persons with chronic physical disabilities or behavioral
health impairments. ABD beneficiaries represent a growing portion of all Medicaid
recipients. In addition, ABD recipients typically utilize more services because
of their critical health issues.
The Balanced Budget Act of 1997 created CHIP to help states expand coverage
primarily to children whose families earned too much to qualify for Medicaid,
yet not enough to afford private health insurance. Some states include the parents
of these children in their CHIP programs. Costs related to the largest eligibility
group, children, are primarily composed of pediatrics and family care. These
costs tend to be more predictable than those associated with other healthcare
issues which predominantly affect the adult population.
A portion of Medicaid beneficiaries are dual-eligible, low-income seniors and
people with disabilities who are enrolled in both Medicaid and Medicare. According
to the Kaiser Commission on Medicaid and the Uninsured, there were approximately
9.6 million dual-eligible enrollees in 2015. These dual-eligible members may
receive assistance from Medicaid for Medicaid benefits, such as nursing home
care and/or assistance with Medicare premiums and cost sharing. Dual-eligibles
also use more services due to their tendency to have more chronic health issues.
We serve dual-eligibles through our ABD, LTC and MMP programs and through Medicare
Special Needs Plans.
Our objective is to become the leading multi-national healthcare enterprise
focusing on the uninsured and under-insured population through government sponsored
healthcare initiatives. We intend to achieve this objective by implementing
the following key components of our strategy:
Increase Penetration of Existing State Markets. We seek to continue to increase
our Medicaid membership in states in which we currently operate through alliances
with key providers, outreach efforts, development and implementation of community-specific
products and acquisitions. For example, in 2015, we began operating under a
contract with the Arizona Department of Health Services/Division of Behavioral
Health Services to be the Regional Behavioral Health Authority for the new southern
geographic service area.
Diversify Business Lines. We seek to broaden our business lines into areas that
complement our existing business to enable us to grow and diversify our revenue.
In 2015, we served managed care members in 23 states through over 200 product
solutions. We are constantly evaluating new opportunities for expansion both
domestically and abroad. For example, in 2015, we announced that we had entered
into a definitive merger agreement with Health Net under which we will acquire
all of the issued and outstanding shares of Health Net. In 2014, we acquired
U.S. Medical Management, a management services organization and provider of
in-home health services for high acuity populations. We employ a disciplined
acquisition strategy that is based on defined criteria including internal rate
of return, accretion to earnings per share, market leadership and compatibility
with our information systems. We engage our executives in the relevant operational
units or functional areas to ensure consistency between the diligence and integration
process.
Address Emerging State Needs. We work to assist the states in which we operate
in addressing the operating challenges they face. We seek to assist the states
in balancing premium rates, benefit levels, member eligibility, policies and
practices, provider compensation and minimizing fraud, waste, and abuse. By
helping states structure an appropriate level and range of Medicaid, CHIP and
specialty services, we seek to ensure that we are able to continue to provide
those services on terms that achieve targeted gross margins, provide an acceptable
return and grow our business.
Develop and Acquire Additional Markets. We continue to leverage our experience
to identify and develop new domestic and international markets by seeking both
to acquire existing business and to build our own operations. Domestically,
we focus expansion in states where Medicaid recipients are mandated to enroll
in managed care organizations because we believe member enrollment levels are
more predictable in these states. In addition, we focus on states where managed
care programs can help address states financial needs. In 2014, we entered
the international market with our investment in Ribera Salud, a Spanish health
management group. In 2015, we began managing care for Medicaid members in Oregon
and also began managing care for members who are dually eligible for Medicare
and Medicaid in Michigan.
Leverage Established Infrastructure to Enhance Operating Efficiencies. We intend
to continue to invest in infrastructure to further drive efficiencies in operations
and to add functionality to improve the service provided to members and other
organizations at a low cost. Information technology, or IT, investments complement
our overall efficiency goals by increasing the automated processing of transactions
and growing the base of decision-making analytical tools. Our centralized functions
and common systems enable us to add members and markets quickly and economically.
Maintain Operational Discipline. We seek to operate in markets that allow us
to meet our internal metrics including membership growth, plan size, market
leadership and operating efficiency. We use multiple techniques to monitor and
reduce our medical costs, including on-site hospital review by staff nurses
and involvement of medical management in significant cases. Our executive dashboard
is utilized to quickly identify cost drivers and medical trends. Our management
team regularly evaluates the financial impact of proposed changes in provider
relationships, contracts, changes in membership and mix of members, potential
state rate changes and cost reduction initiatives. We may divest contracts or
health plans in markets where the states Medicaid environment, over a long
term basis, does not allow us to meet our targeted performance levels. For example,
as a result of lower than anticipated financial performance, in July 2013, we
terminated our Kentucky Medicaid managed care contract with the Commonwealth
of Kentucky.