Health insurer Centene Corp. plans to acquire Magellan Health in a $2.2 billion deal with the aim of establishing a behavioral health platform, the company said in a U.S. Securities and Exchange Commission filing. The acquisition comes as mental health challenges skyrocket amid the Covid-19 pandemic, and providers and payers alike focus on ways to improve access to behavioral healthcare.
Magellan Health provides behavioral health and employee assistance program services, specialty health and integrated care management to health plans, employers and the federal government. It is also a pharmacy benefit manager. With the acquisition, Centene plans to develop a behavioral health platform for its 41 million members. The move shows how mental health is no longer seen as a separate problem to be diagnosed and treated but rather part of overall chronic care management.
“There is a critical need for a fundamentally better approach to supporting people with complex, chronic conditions through better integration of physical and mental health care,” said Michael F. Neidorff, chairman, president and CEO of Centene, in a news release. “This has become even more evident in light of the pandemic which has driven a dramatic rise in behavioral health needs.”
The Covid-19 pandemic has thrown the need for accessible and affordable mental healthcare into sharp relief, with 41% of U.S. adults reporting that they experienced at least one adverse mental or behavioral health condition in June, according to data from the Centers for Disease Control and Prevention. Insurers are looking to establish partnerships that expand mental health services for their members. In November, Aetna expanded its partnership with Inpathy, an online behavioral health service, to provide members in 11 states access to the service in-network.
In addition to combining both Magellan Health and Centene’s capabilities in behavioral health, the acquisition will provide additional scale for the payer’s specialty care division, enabling product development and new third-party relationships.
Magellan Health will bring 5.5 million new members on government-sponsored plans to Centene as well as 18 million third-party customer members that it provides specialty health services for. The transaction will add 2 million pharmacy benefits management members and 16 million medical pharmacy members to Centene’s member base.
“This acquisition accelerates our diversification strategy and enhances our ability to build next generation capabilities in our specialty care business by leveraging our scale and investments in technology,” Neidorff said.
Centene will pay $95 per share in cash for Magellan in a deal worth $2.2 billion. The companies expect to complete the transaction, which is subject to clearances and regulatory approvals, in the second half of 2021.
After the transaction, Magellan Health will join Centene’s Health Care Enterprises division. But it will continue to independently support its existing customers and pursue growth opportunities.
“By joining Centene under the Health Care Enterprises umbrella, we will maintain the independence necessary to ensure continued service to our third-party customers while accelerating the introduction of innovative solutions and reimagining behavioral health,” Kenneth J. Fasola, CEO of Magellan Health, said in a news release. “I look forward to continuing to lead Magellan Health as we create exciting new opportunities for our customers and employees who will benefit from the creation of a best-in-class platform that meets our members’ needs today and in the future.”
Fasola and other Magellan Health leaders will remain in their roles and join Centene.
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