The highlight of the quarter for the Tampa-based insurer was shareholder approval of its pending Centene merger.
One week after Centene Corp. produced its Q2 earnings report, WellCare Health Plans posted total revenues north of $7 billion, according to its latest round of earnings.
WellCare also notched a net income of $182.8 million, an increase of more than $30 million compared to Q1 2019, with an adjusted net income of $219 million.
The Tampa-based insurer was driven by significant growth in its Medicaid plans, which grew from $2.8 billion in Q2 2018 to $4.7 billion in Q2 2019. The company's Medicare segment also increased to $1.8 billion while its Medicare prescription drug plans grew by $59 million.
The highlight of the quarter for WellCare was shareholder approval of the pending $17.3 billion merger with Centene on June 24.
"Our strong revenue and earnings growth in the quarter was the result of continued strong operational and financial execution by our WellCare associates," Ken Burdick, CEO of WellCare, said in a statement. "We remain focused on delivering on our commitments to our government partners on behalf of our 6.3 million members, while we pursue regulatory approvals for our previously announced merger with Centene."
WellCare reported an adjusted earnings per share (EPS) of $4.31, well above its adjusted EPS of $3.69 in Q2 2018. Included in its adjusted EPS was a $2.9 million pre-tax associated with startup costs from its North Carolina Medicaid contract implementation.
Last year's $2.5 billion purchase of Meridian Health Plan of Michigan again boosted the company's Medicaid membership, which held flat quarter-to-quarter at 4.1 million, but marked an increase of 1.3 million members year-over-year.
The Birmingham, Alabama-based post-acute care provider reported that its adjusted earnings per share (EPS) rose 9.1% while its adjusted EBITDA was not far behind with an 8.9% increase to $252.2 million.
The most dramatic turnaround for the company was in its adjusted cash flow, which jumped nearly 28% during Q2, totaling at $142.2 million.
Related: Encompass Health Q1 Revenues Top $1.1B, Guidance Reiterated
Despite the positive metrics, Encompass again reported that its cash flows from operating activities slid by double digits, falling 14.1% to $145.4 million. For the first half of 2019, that metric is down nearly 21%, which the company attributed this to increased working capital.
Encompass did not change its full-year guidance for net operating revenues or adjusted EPS, but did increase its outlook for adjusted EBITDA to a range of $940 million to $960 million.
C-SUITE PERSPECTIVE:
"Our second quarter results represent continued solid operating performance by both of our business segments and serve as further validation of our strategic positioning," Mark Tarr, CEO of Encompass Health, said in a statement. "Our focus remains on delivering our value proposition of providing high-quality patient outcomes in a cost-effective manner and developing solutions for coordinating patient care across the post-acute episode."
Net operating revenues for the inpatient rehabilitation segment rose nearly $40 million year-over-year, despite an 11.6% drop in outpatient and other net operating revenues. Overall, the total segment revenue grew by 4.7% to $873.9 million.
The hospice and home health segment grew by 12%, driven by 35.7% growth in hospice and another 8.7% growth in home health. The total segment revenue topped $261 million.
The company's major acquisition of Q2 was the announcement in April, that it would acquire Alabama-based hospice operator Alacare Home Health & Hospice. The $117 million deal closed in July and resulted in "increase in depreciation and amortization," according to the company's filing.
Additionally, Encompass also settled with the Department of Justice for $48 million over whistleblower allegations that the company submitted false claims to Medicare beginning in 2007.
Health Care Service Corporation CFO Eric Feldstein had been with the company since 2016.
Days after Health Care Service Corporation (HCSC) President and CEO Paula Steiner announced her departure from the Chicago-based insurer, CFO Eric Feldstein tendered his resignation.
Feldstein resigned from his position shortly after Steiner's exit, according to an S&P Global Ratings bulletin issued Monday afternoon.
Feldstein, who joined the company in May 2016, was named CFO in June of that same year.
With Feldstein's departure, HCSC has seen two C-suite executives leave the company in less than a week's time.
Current board member David Lesar will fill in as interim CEO in the wake of Steiner's departure, while Maurice Smith, formerly president of HCSC's Illinois health plan, will serve as president.
No replacement has been named yet for Feldstein's position.
"We appreciate Eric Feldstein’s contributions in his time as chief financial officer at HCSC, most notably to the company’s financial strength and strong culture of ethics and compliance. We wish him well in the future," an HCSC spokesperson wrote in a statement to HealthLeaders.
S&P stated Steiner and Feldstein's exits may indicate that HCSC is pursuing a strategic shift, though its credit strengths "should persist."
"HCSC has a history of long-tenured senior executives, with deep bench strength supporting the senior management team," S&P wrote. "But, this unexpected leadership change is a departure from its traditionally smooth management transitions."
S&P also noted that HCSC has a "low debt burden," "extremely strong capitalization," and "strong operating performance." This report came despite the insurer's slow expansion into the government insurance space, as it is in line with the market position of the company's peers.
The ratings agency did add that sudden executive exits can often point to "questions about the possibility of deeper problems," citing HCSC's "noticeably silent" press release about the reason for the departures.
"The unexpected changes give us pause because they may indicate a strategic shift for the future of the company," S&P wrote. "However, we don't think there is a 'smoking gun' that is yet to be found."
Editor's note: A previous version of this story imprecisely described the number of positions affected by the recent departures of two HCSC executives. The two departures affected three roles: president, CEO, and CFO. This story has also been updated to include a comment from an HCSC spokesperson.
The King of Prussia, Pennsylvania-based company did see its net income and revenues rise.
Universal Health Services, Inc. (UHS) agreed to settle an investigation by the Department of Justice's (DOJ) Civil Division for $127 million, according to the company's latest earnings release Thursday evening.
Though the King of Prussia, Pennsylvania-based hospital management company saw its net income rise by $12 million to $238.3 million, while its net revenues rose 6.5% to $2.86 billion, focus on UHS' earnings centered primarily on the DOJ settlement.
The government had been looking into UHS' behavioral health facilities, though the company said that previously disclosed investigations have been closed.
"We are awaiting the initial draft of a potential corporate integrity agreement with the Office of Inspector General for the United States Department of Health and Human Services ("OIG") which we expect will be part of the overall settlement of this matter," the company stated in the earnings report.
Just as in Q2, the company's EBITDA increased, going from $444.7 million in Q2 2018 to $471.5 million, while net cash provided by operating activities actually increased by $17 million year-over-year, totaling $624 million.
As part of UHS' reported net income, the company included an unrealized gain of $6.9 million, resulting from an increase in "the market value of shares of certain marketable securities held for investment" that were listed for sale.
UHS also announced the authorization of a $1 billion increase to the company's stock repurchase program, boosting the total to $2.7 billion. During Q2, UHS repurchased 2.72 million shares for $339.2 million.
ADDITIONAL UHS Q2 EARNINGS REPORT HIGHLIGHTS:
UHS reported capital expenditures just shy of $154 million, down from $181.2 million this time last year.
The company also reported an unfavorable after-tax impact of $8.9 million in Q2.
Adjusted admissions for acute care services increased 5% year-over-year and adjusted patient days increased 5.2%.
The bipartisan drug pricing bill passed the committee but faces industry opposition and uncertainty in the full Senate.
The Senate Finance Committee passed the Prescription Drug Pricing Reduction Act (PDPRA) Thursday afternoon, a bipartisan bill to address prescription drug pricing.
PDPRA, crafted by Committee Chairman Sen. Chuck Grassley, R-Iowa, and Ranking Member Sen. Ron Wyden, D-Ore., passed the committee by a vote of 19 to 9.
The main components of the bill are $3,100 cap on what Medicare beneficiaries pay out-of-pocket on prescription drugs, set to take place in 2022, and a limit on prescription drug price hikes under Medicare Part D.
Members on both sides of the aisle expressed reservations with what they described as the bill's perceived weaknesses, in some cases voting to move the bill out of the committee while seeking to improve the bill before a full vote on the Senate floor.
Senators on the committee filed 110 amendments, which created contentious arguments over what should or should not be included in the bill as it heads to the Senate floor.
Members of the committee sought to add an amendment that would remove the implementation of the international price index for prescription drugs, a policy supported by the White House, but it did not pass in a tie vote.
An article in The Hill Wednesday afternoon highlighted the growing uncertainty the bill faces in the Republican-controlled Senate, as some members have balked at limiting drug price increases under Medicare Part D.
The Hill reported that HHS Secretary Alex Azar personally reached out to Republican senators to galvanize support for the bill, indicating the White House backed the proposal.
Meanwhile in the House of Representatives, Wendell Primus, an aide to Speaker Nancy Pelosi, said the chamber will present its own drug pricing bill in September.
Industry responses
The pharmaceutical industry has taken proactive steps since the bill's release to pushback on the proposed drug pricing plan.
Politico reported Thursday morning that PhRMA CEO Stephen J. Ubl, as well as representatives from drugmakers Pfizer and Amgen, met with President Trump, Secretary Azar, House Majority Leader Kevin McCarthy and other senior White House officials on Wednesday.
In a statement issued after the bill was passed Thursday afternoon, Ubl said the legislation was the "wrong approach to lowering drug prices."
"It would siphon more than $150 billion from researching and developing new medicines and give those savings to the government, insurers and PBMs, instead of using those savings to lower costs for seniors at the pharmacy counter," Ubl said. "It also fails to ensure the deep discounts negotiated in the Medicare prescription drug program are passed along to patients in the form of lower out-of-pocket costs. And it replaces the successful, market-based structure of Medicare Part D with Medicaid-style price controls that result in money going to the Federal treasury instead of seniors."
Tom DiLenge, president of the advocacy, law and public policy division at the Biotechnology Innovation Organization, commended the committee for approaching the issue of high prescription drug costs but warned that PDPRA "punishes" drugmakers from pursuing innovative cures. DiLenge, like Grassley, added that he also believed the bill could be improved with language reinstating the proposed drug rebate rule.
“The proposal does almost nothing to hold insurance companies and middlemen accountable for shifting more of the cost burden onto patients," DiLenge said. "Instead of eliminating distortions within the drug pricing system, this proposal could create and exacerbate perverse incentives that disadvantage patients and taxpayers."
Some industry stakeholders welcomed the committee's proposal and saw it as a building block for future bills aimed at lowering prescription drug prices.
"We applaud Chairman Grassley and Ranking Member Wyden for their dedication to lowering prescription drug prices for Americans,” Campaign for Sustainable Rx Pricing executive director Lauren Aronson said in a statement. “The committee’s bipartisan actions are a good first step. We are reviewing the details of this package and look forward to working with committee members to advance measures to hold Big Pharma accountable.”
David Henka, CEO of ActiveRADAR, a healthcare analytics company, told HealthLeaders in an emailed statement that while Congress is seeking to provide relief for Medicare beneficiaries and take on the pharmaceutical industry, he doesn't believe PDPRA has fully accounted for the potential unintended consequences on the market.
"These types of economic environments are like a scale; any time you push the prices down on the Medicare or government side of the business, you’re going to see a corresponding, inverse change in the commercial side," Henka wrote. "The federal government may pay less for pharmaceuticals, but the commercial employers and plan sponsors will end up paying more. Pharma will continue to meet its margins one way or the other, even if they are forced to lower their prices on the government side."
A white paper released by Leavitt Partners Wednesday offers recommendations for improving NEMT.
Medicaid leaders and healthcare industry stakeholders are advised to consider actions that could improve program integrity for non-emergency medical transportation (NEMT), according to a white paper released by Leavitt Partners Wednesday.
The paper provides specific recommendations for both the Centers for Medicare and Medicaid Services (CMS) as well as state Medicaid programs in order to "protect the program from those who would exploit or defraud the program and could cause harm to Medicaid beneficiaries."
The white paper acknowledges that NEMT services have changed dramatically since the program debuted in 1966, especially with the rise of ridesharing companies like Uber and Lyft in the healthcare space.
Couathors Josh Trent, principal at Leavitt Partners, and Charlene Frizzera, senior advisor at Leavitt Partners, wrote that NEMT assists Medicaid beneficiaries who "lack reliable sources of transportation" and ensure that at-risk patients do not forgo treatment and improve health outcomes.
Despite highlighting the benefits associated with NEMT, Trent and Frizzera pointed to issues with program integrity, including lacking oversight audits and improper payments that can "erode public support for Medicaid services.”
For CMS, the authors urge the agency to update NEMT program integrity review, "facilitate collaboration on leading practices," and implement the open recommendation issued by the Government Accountability Office in 2016.
Trent and Frizzera argue that state Medicaid leaders should position their respective systems to "detect and prevent" known fraud schemes, ensure the complaint and appeals process for beneficiaries is consistent, and consider the role of transportation network companies like Uber, Lyft, or Veyo.
"The delivery of Medicaid NEMT services has evolved in the last decade or so, as external forces have created new opportunities and placed new expectations on the program,” Trent and Frizzera wrote. "It is essential that Medicaid leaders across Medicaid state programs, brokers, managed care plans and delivery systems work collaboratively to improve the integrity of the program for the benefit of patients and the program itself."
In addition to Leavitt Partners, members of Congress have recently spoken out on CMS' plans for NEMT, pushing back on a recent regulation put forward in the Trump administration's fiscal year 2020 budget proposal.
In mid-June, three congressmen authored a letter to CMS Administrator Seema Verma expressing concerns about proposed regulations to allow state Medicaid programs to drop NEMT coverage.
The letter, written by Reps. Sanford Bishop, D-Ga., Buddy Carter, R-Ga., and Tom Graves R-Ga., urged Verma to support state flexibility without "overturning a Medicaid policy in place for over 50 years" in a move that they said could affect "our most vulnerable beneficiaries."
On June 11, the Trump administration publicly expressed its opposition to H.R. 2740, a bill aiming to prohibit CMS from allowing state Medicaid programs to make NEMT benefits optional. The bill passed the House on June 19.
Murthy, who is making her first foray into healthcare, told HealthLeaders she was drawn to the role based on growth opportunities for telemedicine.
She discussed her goal of working with stakeholders to improve the telemedicine reimbursement model about two weeks before the Purchase, New York–based company releases its Q2 earnings report.
This transcript has been lightly edited for brevity and clarity.
HealthLeaders: What interested you about joining Teladoc?
Murthy: What's not to love about being in virtual healthcare? It's a great time from the demographic tailwinds that [Teladoc has], the macroeconomic trends that we have, and this is an inflection point for the industry and for this space from a growth standpoint. As I talked to [CEO] Jason [Gorevic], I loved the culture and the tone he set with his leadership team.
HL: What do you see as the biggest opportunities, as well as some of the obstacles still in the way for telemedicine?
Murthy: First, I think there is a tremendously big, addressable market. Second, there are vast areas of our population that don't have the best access to healthcare today, which we can solve with virtual healthcare and telehealth. Third, if you look at demographically where we are headed, all the trends point to greater comfort in using things remotely, using devices. That also, I think, feeds into a growing adoption of telemedicine. If you look at our quarterly numbers, you're beginning to see the utilization rates expanding and the increase in membership. [These] are important barometers of the growing comfort with telemedicine.
In terms of challenges, there is a whole institution of healthcare in the United States. There are nuances and details [about] reimbursement—as we've talked about with Medicare and Medicaid—that need to be ironed out. There are details that have to be worked through when it comes to the notion of who pays and how much they pay. Healthcare and healthcare use is intensely personal to the member. Just like any other form of healthcare, in telehealth, we have to make sure that the providers are delivering top-notch quality care. If you look at the areas that are of strategic importance for us, it is around the concept of quality. Making sure that, not just us, but all of the other players in the space, deliver excellence around member care.
HL: I see telemedicine as similar to the non-emergency medical transportation market, where you have a number of players splitting the pie while also trying to maximize a space that's on the rise in healthcare. How do compete for your share, while also focusing on expanding telemedicine?
Murthy: What you said is so true. There is space for many players done well and done right. [Teladoc] is firmly focused on how we grow and how we grow in the right way. This is a company that has been in this space for many years, so we have methodically gone about building the infrastructure, platform, and capabilities. And that's what we will want to continue to focus on. How do we focus on a few important, strategically important bets? How do we invest in them and how do we that in a disciplined way?
HL: How does Teladoc intend on bringing skeptical patients into the telemedicine fold?
Murthy: This is human behavior and it's going to take time. We have an incredible marketing team within our company that spends a lot of time engaging with members. We are doing our part in terms of engagement programs, in various ways, to get people comfortable accessing care, not through a traditional brick-and-mortar experience. I was reading an analyst's report that showed some fascinating statistics around the incidence of [telemedicine] use by different age groups. What was so interesting to me was if you looked at people who are older, and the percentage they consume of telehealth care, it was higher than I had expected. My point is, don't write off the older generations just yet.
HL: Where are you putting your priorities in conversations with industry stakeholders, such as provider executives, or lawmakers at the federal and state level regarding reimbursement challenges?
Murthy: Whether it's Teladoc or other players in the space, we will have to grapple with all of these issues over time. I will say specifically for us, if I go back and think about the priorities that Jason articulated in investor day, it was along a few vectors. It was focusing on certain member needs, such as mental health. We have been in acute care for a long time, and so there have been conversations more generally around opportunities beyond mental health, [such as] in the chronic care space. Second, how can we continue to be the leader in making sure that we are on all of the front doors to healthcare? The fact that we have a great presence in many channels is a competitive advantage for us from a scale perspective. So how do we continue to build on that? How do we continue to maintain our leadership on that?
The insurer's membership grew by 1.3 million while operating revenues rose by almost 11%.
Anthem Inc. expects its year-end net income per share to exceed previous expectations thanks to the introduction of the insurer's pharmacy benefit manager (PBM) IngenioRx, according to the company's earnings report released Wednesday morning.
The Indianapolis-based insurer reported a net income of $4.36 per share for Q2, with an adjusted net income of $4.64 per share. Looking ahead, Anthem projects its year-end net income to be greater than $18.34 per share while its adjusted net income will exceed $19.30 per share.
During Q2, Anthem saw its medical enrollment reach 40.9 million members, up 1.3 million compared Q2 2018, while operating revenues rose by almost 11% to $25.2 billion.
Anthem attributed the strong revenue metrics to business-wide membership growth and premium increases, though it noted the results were partially offset by the one year waiver of the health insurance tax.
C-SUITE PERSPECTIVE:
"Our second quarter results reflect solid top line growth across our businesses and reinforce our commitment to innovation and performance execution," Gail Boudreaux, CEO of Anthem said in a statement. "We began successfully migrating members to IngenioRx on May 1 and have received transition approvals from all of our 14 Blue states and the majority of our Medicaid states. We are tracking ahead of expectations, and as a result, we now expect IngenioRx to achieve the upper end of our $0.70 - $0.90 guidance."
Boudreaux added that IngenioRx secured its first external pharmacy contract with Blue Cross of Idaho, which will begin in 2020.
Breaking down Anthem's membership growth, its government segment grew by 1 million members courtesy of Medicare and Medicaid, while the commercial and specialty segment increased by 290,000 members.
Once again, the insurer posted a total operating gain, however its $1.4 billion gain marked an 8% decline year-over-year.
Beyond the debut of IngenioRx, Anthem's most significant business move was the announcement in early June that it planned to purchase Beacon Health Options, a Boston-based behavioral health organization.
Despite Anthem's decent Q2 earnings report, the company's stock fell by nearly 7% during early morning trading.
Jeff Becker, a senior analyst at Forrester, told HealthLeaders that Anthem's "aggressive shift" to value-based care (VBC) contracting is already ahead of pace while the company had improved its digital member engagement strategy.
During Anthem's earnings call, they reported 59% of medical spend fell under its VBC agreements, according to Becker, and is in line with its goal of achieving 75% by the end of 2020. He added that Anthem has tied 36% of its VBC contracts to downside-risk shared savings programs.
ADDITIONAL ANTHEM Q2 EARNINGS REPORT HIGHLIGHTS:
In Q2, Anthem posted an operating cash flow of $1.4 billion, an increase of nearly $900 million year-over-year.
On Tuesday, the company distributed its Q2 dividend totaling $206 million.
Anthem repurchased 1.7 million shares in Q2 for $458 million.
Centene kept its momentum going in Q2, achieving total managed care membership of 15 million.
At the end of Q2 2019, Centene Corp. posted revenues of $18.4 billion, a 29% year-over-year increase, according to the insurer's earnings report released Tuesday morning.
Centene beat its earnings expectations by $0.05 per diluted share (EPS), with a diluted EPS of $1.18, representing a 57% year-over-year increase. The company's adjusted EPS was $1.34, up 49% compared to Q2 2018.
The St. Louis-based insurer grew to cover 15 million managed care members, up 2.2 million members, as its Medicaid segment grew by nearly 1.3 million members.
The most significant developments for Centene during Q2 related to its ongoing $17.3 billion deal to acquire Tampa-based WellCare Health Plans, which received shareholder approval in late June.
C-suite perspective:
"Our strong second quarter results demonstrate Centene's favorable financial and operating momentum," Michael Neidorff, CEO of Centene, said in a statement. "Our pending WellCare acquisition will bolster and diversify our product offerings, significantly increase our scale and provide access to new markets - enhancing Centene's long-term growth outlook."
Company leadership once again raised the annual guidance for total revenues from a range of $72.8 billion to $73.6 billion, to a range of $73.6 billion to $74.2 billion.
Similarly, Centene now projects its year-end diluted EPS to be between $3.70 and $3.87.
Centene recorded total cash, cash equivalents, and restricted cash and cash equivalents just shy of $6.9 billion in Q1, which was down from $8.5 billion in Q2 2018.
However, the company achieved total cash flows provided by operations of $917 million and adjusted net earnings of $561 million, an increase of over $201 million year-over-year.
The WellCare acquisition, the centerpiece of Centene's forward-looking business strategy, encountered a brief obstacle in late May when the Department of Justice requested additional information ahead of the planned merger. The move effectively delays finalization of the deal by 30 days.
Within a week, Centene was in the news again as Humana leadership publicly refuted media reports that the Louisville-based insurer was interested in purchasing Centene as the WellCare deal faltered.
The dialysis treatment company is offering up $1.2 billion worth of common stock at a price range between $53.50 and $61.50 per share. This action allows shareholders to determine the quantity of stocks they seek to tender and at what price in DaVita's range they will pay for them.
DaVita's Q2 earnings were released in coordination with the company's ongoing bank financing process, the proceeds of which will be used to repay outstanding credit amounts, fund the tender offer, and "add cash to the balance sheet."
The results also mark the first financial metrics released since DaVita announced the promotion of DaVita Kidney Care CEO Javier J. Rodriguez as the company's new CEO effective June 1.
According to the earnings release, the company expects to post an operating income between $460 million and $465 million for Q2, including $40 million attributable to calcimimetics, a treatment for end stage renal disease.
DaVita anticipates reporting non-acquired treatment growth of 2.1%, revenue per treatment of $350, and a decrease in the cost per treatment by $9.
DaVita is planning to update its year-end financial guidance, with an adjusted operating income between $1.64 billion and $1.70 billion, above the previous range of $1.54 billion to $1.64 billion.
Other than the executive leadership change, DaVita's Q2 also featured favorable news coming out of Washington, D.C.
On June 20, UnitedHealth received approval from the Federal Trade Commissionfor the long-delayed $4.3 billion merger of DaVita Medical Group with its Optum subsidiary.
Three weeks later, President Donald Trump signed an executive order to launch a new kidney care initiative aimed at lowering the cost of dialysis treatment, which raised the company's stock.
Similarly, news of the 'Dutch auction' boosted DaVita stock more than 5% in early morning trading.
ADDITIONAL Davita Q2 EARNINGS REPORT HIGHLIGHTS:
DaVita repurchased nearly $350 million in shares between its last earnings call on May 7 and July 17.
Subsequently, the company terminated its previous repurchase agreement and implemented a $2 billion repurchase agreement with no expiration date.