Molina Healthcare signed a definitive agreement to acquire Louisville, Ky.-based Passport Health Plan's Medicaid and dual eligible special needs lines of business, the Long Beach, Calif.-based insurer announced Friday.
The acquisition follows Molina's successful bid to manage Kentucky's Medicaid business, which Gov. Andy Beshear awarded to Molina and four other insurance companies in May. Passport has around 315,000 members in Kentucky, which makes up about a quarter of the market.
"Acquiring the operations as well as transferring over employees of Passport Health Plan provide us with a well-known brand in Kentucky and position us well to compete even more effectively in the market," Joe Zubretsky, president and CEO of Molina, said in prepared remarks. "We look forward to being able to achieve a major objective of this transaction, which is the continuity of care for Passport's members."
Passport and Anthem were outbid by Molina, Aetna, Humana, UnitedHealthcare and WellCare for contracts worth $8 billion a year to manage around 1.4 million managed Medicaid beneficiaries in Kentucky. As part of the transaction, Molina will acquire the Passport name and extend career opportunities for approximately 500 Kentucky-based Passport and Evolent Health employees.
Molina plans to pay for the $20 million purchase price with cash. The deal, which is expected to close before the end of 2020, includes a membership retention performance bonus of $40 million, SVB Leerink analysts wrote in a note to investors.
"We view this deal as yet another example of the attractive opportunity to generate accretion from tuck-in Medicaid deals that Molina Healthcare is uniquely well-positioned to capitalize on, given its size, scale and balance sheet," the note reads.
Molina's primary business line is Medicaid managed care. It served 3 million Medicaid members at the end of 2019, a decrease of 12% from 2018, stemming from contract losses in Florida and New Mexico.
Molina reported revenue of $16.8 billion in 2019, down 10.9% from 2018, while its net income grew 4.2% to $737 million.