Aetna 

At a Glance

  • All major news items focused on the CVS acquisition.
  • New business in KS Medicaid upheld in court. 
  • Interest shown for N.C. MCO procurement during LOI process.  

    • Stock Performance

    Leadership News

  • CFO Shawn Guertin will step down summer 2019. Guertin had been expected to become the CEO of the new organization but instead will leave the company. (Announced October). Some analysts express concern over the smoothness of the Aetna/CVS integration without continuity on the Aetna finance team. 
  • CEO Mark Bertolini will resign after CVS deal completes. Current Aetna President Karen Lynch will step into the CEO role. 
  • Larry Merlo, current CVS CEO, will become the CEO of the combined organization. 
  • Severance payouts for senior roles are estimated to total $400M-$600M. 

    • M&A Activity

  • The CVS acquisition completed November 28. 
  • The total deal value was $70B. Outstanding Aetna shares were purchased at $145 per share, with the deal adding about $70 per share in value estimation (for a total of $212 per share arriving at the $70B figure).
  • Aetna had to agree to sell off its Part D drug plans to WellCare by December 31.
  • The new company will go by "CVS Health" and is expected to roll out chronic condition management programs via its retail locations. Most analysts see the combination as a significant disruptor to facility-based providers, including hospitals. 
  • CVS has committed to keeping Aetna in Hartford, CT for at least 10 years (Aetna has been in CT for 165 years).  

    • Other Lines of Business

    See other notes on selling of Part D plans to WellCare as condition of CVS acquisition. There were 8.5M pharmacy members at the end of 2018. 

    Shareholder Call Summary

    This is Molina Need to Update 

     Latest available call date: 11/1/2018

    Reporting on Q3 ending performance.  


    Comparing Q3 to Q2

    • Overall Medical Care Ratio (MCR) increased from 85.3% to 87.4%.
    • Medicaid MCR went from 89.8% to 90.5%. Would have been flat if not for the CA risk corridor payments (see below).
    • Marketplace MCR went from 57.4% to 64.1%.
    • Net profit margin 4.2% for quarter (3.6% for year)
    • Net income down $5M compared to previous quarter, with premium revenue decrease of 4% driving. Some of this decrease related to recognition of 2017 marketplace risk adjustment revenue being recognized in Q2 (so appeared to be step down in Q3). A $57M CA Medicaid risk corridor reduction was also recognized in this period.
    • General and administrative (G&A) decreased from 6.9% to 6.6%.
    • Sale of Molina MMIS ops to DXC completed September 30th for $233M.


    Comparing Same Quarter, YOY

    ​

    Q3 2018

    Q3 2017

    Net income $197M

    Net loss ($97M)

    State Market News

    Medicaid  

    • Aetna was one of 8 interested bidders in the N.C. MCO procurement (October).  
    • A KS judge ruled the state's decision to replace Amerigroup with Aetna will stand (October). 
    • Aetna FL (Coventry) removed Mount Sinai Medical Center from its Medicaid netowork in a highly publicized fight during annual contract negotiations (October). 

    Non-Medicaid

    • Aetna OK was fined $25M for its denial of coverage for services to a stage 4 cancer patient (November)
    • Buildout of accountable care product in N.C. with addition of Cone Health and Triad HealthCare Network (November). Already has Duke and WakeMed. 
    • Aetna (NJ, D.C. and CT) settled claims around PHI data breach for $17M.  Centers on breach in 2017 with HIV/AIDS status info being mailed and a separate breach containng information about atrial fibrilation study patients. 

    END OF REPORT

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