“Such a transaction, if it materialized, has broader implications for healthcare and could potentially catalyze a new wave of vertical consolidation across hospitals and publicly traded health plans, which has not been broadly contemplated within the investment community,” Gupte wrote.
That's because larger publicly traded health plans have not expressed an interest in hospital deals, with some instead moving to acquire physician practices, Gupte said in an interview. Also notable would be a not-for-profit health system's deal for a for-profit insurance company.
Ascension Health is not the only hospital operator with an interest in health insurance markets. Catholic Health Initiatives, Englewood, Colo.; Partners HealthCare, Boston; and the Detroit Medical Center have all acquired health plans.
Others have moved to build health plans from scratch, including Sutter Health, Sacramento, Calif.; North Shore-Long Island Jewish Health System, Great Neck, N.Y.; and a combined effort by the Georgia health systems Piedmont Healthcare, Atlanta, and WellStar Health System, Marietta.
Michigan is among the states where WellCare and Ascension Health jointly operate. Michigan is Ascension's largest market—it accounted for one-fifth of the company's revenue and 20% of its operating cash flow last year, according to Moody's Investors Service.
Ascension Health also announced a deal earlier this month with CHE Trinity Health, another of the largest U.S. health systems, to combine its 27 Michigan hospitals and a dozen physician organizations into a clinically integrated network.
WellCare reported first-quarter growth of 60,000 Medicaid members as eligibility for the safety-net insurer expanded in many states under the Patient Protection and Affordable Care Act.
Centene, based in St. Louis where Ascension is headquartered, operates in 20 states, Gupte wrote. Centene does not operate a health plan in Michigan, according to its website, but last December the company reached a deal to acquire a majority stake in Fidelis SecureCare of Michigan, which develops Medicare managed-care drug plans and special needs plans. The deal is expected to close in the fourth quarter this year, according to Securities and Exchange Commission filings.
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