- Centene is looking to divest “non-core assets” as it embarks on a long-term plan to improve its profit margin. Executives said they also plan to consolidate the company’s pharmacy benefit management business down to one platform and plan to send out a request for proposal in 2022 for a PBM to manage its more than $30 billion in pharmacy spend across its business.
- As patient utilization returned to more normal levels, Centene’s medical loss ratio — an important measure of what it spends on care — beat Wall Street expectations coming in at 88.1%.
- After a second quarter loss, Centene bounced back to a profit of $584 million for the third quarter on revenue of $32.4 billion, an 11% increase from the prior-year quarter.
The delta variant fueled a rise in COVID-19 cases and hospitalizations throughout the summer, weighing heavily on providers. But cases and hospitalizations have been steadily trending down since September.
Centene noted a similar pattern in its patient volume.
COVID-19 costs peaked in late August, dropped throughout the month of September, and continued on a steeper decline throughout October, executives told investors during Tuesday’s earnings call.
This rebound in the third quarter seems to match CEO Michael Neidorff’s previous comments that results throughout the year could be “choppy” as insurers continue to navigate the ongoing pandemic.
For example, Centene reported a $535 million loss in the second quarter as more members sought out care. Executives describe the broad return to the doctor’s office as “pent up demand.” Marketplace members fueled the higher utilization in the second quarter, seeking out services such as for deteriorating joints, in addition to psychiatry and chemical dependency services.
On Tuesday’s call, executives said the pent up demand started to subside in July.
“CNC’s results reflect an improvement from a messy 2Q, burdened by higher medical costs and an MLR miss,” Jefferies analysts said in Tuesday note.
Centene ended the quarter with 26.5 million members, a 5% increase from the prior-year period, in part fueled by growth in Medicaid as federal policies allow members to maintain coverage through the duration of the COVID-19 public health emergency.
Leaders also teased components of the company’s “value creation plan” and promised more details to come in December.
The plan, which aims to improve profit margin long term, includes “taking steps toward consolidating down to a single PBM platform” and selling non-core assets, Sarah London, president and vice chair, said. Neidorff said to expect these sales to happen sooner rather than later. “It’s not … look for this in ’23, ’24, you should expect some indications of what’s happening sooner,” Neidorff added.