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Centene Corporation Reports 2017 Second Quarter Results & Raises 2017 Guidance



7/25/2017 11:26:38 AM

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ST. LOUIS, July 25, 2017 /PRNewswire/ -- Centene Corporation (NYSE: CNC) announced today its financial results for the second quarter ended June 30, 2017, reporting diluted earnings per share (EPS) of $1.44, and Adjusted Diluted EPS of $1.59. The second quarter of 2017 includes a $0.17 per diluted share net benefit related to the reconciliation of the 2016 risk adjustment under the Affordable Care Act (ACA) in connection with our Health Insurance Marketplace business. In addition, strong 2017 Marketplace performance exceeded our expectations in the second quarter by $0.12 diluted earnings per share.

In summary, the 2017 second quarter results were as follows:

Total revenues (in millions)

$

11,954



Health benefits ratio

86.3

%


SG&A expense ratio

9.3

%


GAAP diluted EPS

$

1.44



Adjusted Diluted EPS (1)

$

1.59



Total cash flow used in operations (in millions)

$

(306)






(1) A full reconciliation of Adjusted Diluted EPS is shown on page seven of this release.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We are pleased with the strong second quarter performance across our product lines. The Marketplace business continues to be particularly strong, confirming our business as usual approach."

The following discussions, with the exception of cash flow information, are in the context of continuing operations.

Second Quarter Highlights

  • June 30, 2017 managed care membership of 12.2 million, an increase of 788,300 members, or 7% compared to the second quarter of 2016.
  • Total revenues for the second quarter of 2017 of $12.0 billion, representing 10% growth, compared to the second quarter of 2016.
  • Health benefits ratio (HBR) of 86.3% for the second quarter of 2017, compared to 86.6% in the second quarter of 2016.
  • Selling, general and administrative (SG&A) expense ratio of 9.3% for the second quarter of 2017, compared to 9.2% for the second quarter of 2016.
  • Adjusted SG&A expense ratio of 9.3% for the second quarter of 2017, compared to 9.0% for the second quarter of 2016.
  • Operating cash flow of $(306) million for the second quarter of 2017 and $942 million for the six months ended June 30, 2017.
  • Diluted EPS for the second quarter of 2017 of $1.44, compared to $0.98 for the second quarter of 2016.
  • Adjusted Diluted EPS for the second quarter of 2017 of $1.59, compared to $1.29 for the second quarter of 2016.

Other Events

  • In July 2017, we announced our partnership with Schnuck Markets, Inc. and Betty Jean Kerr People's Health Centers to launch a full-service health center located within the Schnucks supermarket in Ferguson, Missouri. Scheduled to open in November 2017, the People's Healthcare Services Clinic by Home State Health represents our continued investment in the city of Ferguson. Once the facility is fully operational, it will be able to provide services to over 8,000 people annually. 
  • In July 2017, our Georgia subsidiary, Peach State Health Plan, began operating under a statewide managed care contract to continue serving members enrolled in the Georgia Families managed care program, including PeachCare for Kids and Planning for Healthy Babies. Through the new contract, Peach State Health Plan is one of four managed care organizations providing medical, behavioral, dental and vision health benefits for its members.
  • In July 2017, our Nevada subsidiary, SilverSummit Healthplan, began serving Medicaid recipients enrolled in Nevada's Medicaid managed care program.
  • In July 2017, our specialty solutions subsidiary, Envolve, Inc., began providing health plan management services for Medicaid operations in Maryland.
  • In June 2017, our Mississippi subsidiary, Magnolia Health, was selected by the Mississippi Division of Medicaid to continue serving Medicaid recipients enrolled in the Mississippi Coordinated Access Network (MississippiCAN). Pending regulatory approval, the new three-year agreement, which also includes the option of two one-year extensions, is expected to commence midyear 2018.
  • In June 2017, we announced that we are expanding our offerings in the 2018 Health Insurance Marketplace. We are planning to enter Kansas, Missouri and Nevada in 2018, and expanding our footprint in six existing markets: Florida, Georgia, Indiana, Ohio, Texas, and Washington.
  • In June 2017, Centurion began operating under an expanded contract to provide correctional healthcare services for the Florida Department of Corrections in South Florida.
  • In May 2017, our Washington subsidiary, Coordinated Care of Washington, was selected by the Washington State Health Care Authority to provide managed care services to Apple Health's Fully Integrated Managed Care (FIMC) beneficiaries in the North Central Region. The contract is expected to commence January 1, 2018.
  • In May 2017, our Missouri subsidiary, Home State Health, began providing managed care services to MO HealthNet Managed Care beneficiaries under an expanded statewide contract.

Accreditations & Awards

  • In July 2017, FORTUNE magazine announced Centene's position of #244 in its annual ranking of the largest companies globally by revenue. Centene jumped 226 spots from #470, making us the fastest growing company on the list.
  • In June 2017, FORTUNE magazine announced Centene's position of #66 in its annual ranking of America's largest companies by revenue. Centene jumped 58 spots from #124.
  • In May 2017, at Decision Health's Eighth Annual Case in Point Platinum Awards, Centene and three of its subsidiaries (Home State Health, Centurion, and Envolve, Inc.) were honored for four of our innovative member programs.
  • In April 2017, our subsidiary, Health Net Federal Services, LLC, was awarded the International Organization for Standardization (ISO) 9001:2015 certification, an internationally recognized standard for quality management systems.

Membership

The following table sets forth the Company's membership by state for its managed care organizations:


June 30,


2017


2016

Arizona

669,500



597,700


Arkansas

91,900



52,800


California

2,925,800



3,097,600


Florida

871,100



726,200


Georgia

540,400



493,300


Illinois

254,600



234,700


Indiana

340,000



291,000


Kansas

130,000



144,800


Louisiana

484,600



375,300


Massachusetts

54,100



47,100


Michigan

2,300



2,200


Minnesota

9,500



9,500


Mississippi

343,600



323,800


Missouri

278,300



102,900


Nebraska

78,800




New Hampshire

77,100



79,700


New Mexico

7,100



7,100


Ohio

332,700



319,000


Oregon

213,600



221,500


South Carolina

121,000



113,700


Tennessee

22,200



20,800


Texas

1,226,800



1,037,000


Vermont

1,600



1,600


Washington

248,500



239,700


Wisconsin

70,800



76,100


Total at-risk membership

9,395,900



8,615,100


TRICARE eligibles

2,823,200



2,815,700


Total

12,219,100



11,430,800


 

The following table sets forth our membership by line of business:


June 30,


2017


2016

Medicaid:




TANF, CHIP & Foster Care

5,854,400



5,541,200


ABD & LTC

843,500



757,500


Behavioral Health

466,500



455,800


Commercial

1,743,600



1,391,500


Medicare & Duals (1)

327,500



332,600


Correctional

160,400



136,500


Total at-risk membership

9,395,900



8,615,100


TRICARE eligibles

2,823,200



2,815,700


Total

12,219,100



11,430,800







(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans.

The following table sets forth additional membership statistics, which are included in the membership information above:


June 30,


2017


2016

Dual-eligible

467,500



436,100


Health Insurance Marketplace

1,084,600



617,700


Medicaid Expansion

1,101,900



1,004,200



Statement of Operations: Three Months Ended June 30, 2017

  • For the second quarter of 2017, total revenues increased 10% to $12.0 billion from $10.9 billion in the comparable period in 2016. The increase over prior year was primarily a result of growth in the Health Insurance Marketplace business in 2017 and expansions and new programs in many of our states in 2016 and 2017, partially offset by lower membership in the commercial business in California as a result of margin improvement actions taken last year, the moratorium of the Health Insurer Fee in 2017, and lower specialty pharmacy revenues. Sequentially, total revenues increased 2% over the first quarter of 2017 mainly due to favorable risk adjustments in our Health Insurance Marketplace business recorded in the second quarter of 2017, as well as the commencement of our new contract in Missouri.
  • HBR of 86.3% for the second quarter of 2017 represents a decrease from 86.6% in the comparable period in 2016 and a decrease from 87.6% in the first quarter of 2017. The year over year decrease is primarily attributable to growth in the Health Insurance Marketplace business, which operates at a lower HBR. The sequential HBR decrease is primarily attributable to favorable risk adjustments in our Health Insurance Marketplace business recorded in the second quarter of 2017 and normal seasonality. 
  • The SG&A expense ratio was 9.3% for the second quarter of 2017, compared to 9.2% for the second quarter of 2016 and 9.8% for the first quarter of 2017. The increase in the SG&A expense ratio is primarily attributable to higher variable compensation expenses based on the performance of the business in 2017 and increased business expansion costs, partially offset by higher Health Net acquisition related expenses in 2016.

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