We don't look for bad companies that we can make good. We look for good companies that can avail themselves to our technology, capability and critical mass.”
Q&A: Centene CEO Michael Neidorff stays focused on attaining growth
Centene Corp. has made a name for itself as the dominant insurer on the health insurance exchanges, having reached nearly 1.5 million members last year. The St. Louis-based company's exchange business accounted for $10 billion of its $60.1 billion in 2018 revenue. Centene recently won a contract to serve Medicaid beneficiaries—its primary customer base—in North Carolina starting in 2020. Centene CEO Michael Neidorff sat down with Modern Healthcare's Tara Bannow at the J.P. Morgan Healthcare Conference in January to discuss the company's strategy for future growth, and explained why he doesn't concern himself with the competition. The following is an edited transcript.
MH: Is there any more M&A activity pending on your front? Anything you can talk about?
Neidorff: I could tell you, but I'd have to break your recorder. We can't talk about M&A until it's done. There are opportunities that we are looking at. We have pretty strict criteria. Like Fidelis Care in New York. It was a sensational, incredibly well-run company. Solid management, seamless innovation. We don't look for bad companies that we can make good. We look for good companies that can avail themselves to our technology, capability and critical mass.
MH: In these kind of deals, are you looking to add a specific product or service line?
Neidorff: On the technology deals we do. In health plans, we wanted to head to New York. But we've been wanting to go to New York for a long time. We waited until we found the right plan, a good plan, with critical mass. Because we don't want to be small in New York. This is the largest healthcare plan there is. With all 62 counties, solid management, good results.
MH: Can you talk a little bit about why you're interested in QualChoice?
Neidorff: We were in Arkansas, and it's a well-rounded company. It adds to our critical mass. They needed what we can offer in terms of assistance and capabilities. They wanted to continue to grow. It just made sense to do it.
MH: It struggled financially under Catholic Health Initiatives. What will turn it around?
Neidorff: We have a corporate structure there, and we have the ability to have the systems that they don't have, and we also have a balance sheet that can help them invest and grow.
MH: What do you mean by the systems that they don't have?
Neidorff: We have medical management systems, predictive systems; a lot of things that are very unique.
MH: Because you're a health plan?
Neidorff: Yes, that's our business. We have interpreters. We can look at 14.5 million files in 3 minutes or less and say if somebody's profile is changing. Not everybody has that.
MH: A lot of health systems running their own plans say they can lower premiums in their ACA products. Do you see that as competition?
Neidorff: Integrated systems have been tried in every generation. It's been my belief that unless they have a third-party administrator, it doesn't happen. We're working with the largest Catholic hospital group there is to put together a Medicare plan. I think they're smart enough to realize that they need our assistance, they need us as a third party to adjudicate utilization management. But when a hospital says, “We'll manage our own utilization of our doctors,” the hospitals want to keep beds filled, that's why they do health plans, not because they want to lower costs.
MH: They would probably take issue with that.
Neidorff: There are some hospitals that are lowering costs, and I'm sure they will be. I haven't met a hospital yet that doesn't say they're concerned about keeping their beds filled. I'm not saying it's wrong from their perspective, they have a huge capital infrastructure.
MH: What about a system like Kaiser Permanente? It usually has about $1 billion in net income. They're not using a third-party administrator, right?
Neidorff: There are exceptions to every rule. They've been in existence for a long time. They have a very important niche. They do a good job, but that's not something you just instantly switch and turn around and say, “I'm going to be another Kaiser.” It's very difficult. Geisinger in Pennsylvania has done the same thing. There are exceptions.
MH: But do you think that if it's a Centene ACA plan or one of the integrated healthy systems' plans, you're better-suited to manage the costs of those members?
Neidorff: I'm not saying we're better suited. I think we do it well. Our premiums have averaged the last four years across a whole book of issues with about a 1% or 2% increase. We have very high quality scores and systems that allow us to be interdictive with these states that get ahead of the curve.
No one (organization) is going to have it all. I prefer not to beat my chest and talk about how we're doing it right.
MH: But that's kind of what the J.P. Morgan conference is all about.
Neidorff: Maybe some are going to, but I'm not. I don't want to listen to it, I don't want to be influenced by it. I'm going to worry about us and our strategies.
MH: What's happening with your international operations?
Neidorff: In Madrid, we have an integrated system of hospitals, clinics—the (government) builds the hospital. We staff them, maintain them. They give us a capitation to do it. We're told it's the best example of a public-private partnership most people have seen. There's high quality, member satisfaction. In England, we have a practice that is a group of physicians who treat about 300,000 patients, and that's a way to enter the market. There's an interest in a lab company in one of the Eastern European countries. It's a growing enterprise.
MH: How many hospitals are in the system in Madrid?
Neidorff: The one; it's very large. There will be others.
MH: Since that's an integrated system and you are working on a capitated basis, does it help inform your operations here?
Neidorff: It's a state-sponsored program. It's very different than what we've talked about here. People are assigned to it. It's very high quality.
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