Health Plan Weekly

Confirming a tie-up that had been rumored for months, CVS Health Corp. on Feb. 8 revealed that it struck a $10.6 billion deal to buy Oak Street Health, which owns primary care centers catering to Medicare-eligible patients. Executives of the two firms say the benefits of the proposed transaction abound for both CVS Health and Oak Street, but industry observers say the acquiring firm still faces a bevy of risks as it seeks to incorporate multiple new care delivery assets. 

During CVS Health’s conference call to discuss fourth-quarter and full-year 2022 financial results, CEO Karen Lynch and Mike Pykosz, Oak Street’s president, discussed the merits of the deal at length.  

Medicaid managed care organizations (MCOs) face a daunting challenge this year as the safety-net insurance program is poised to resume eligibility checks that had been suspended during the COVID-19 public health emergency (PHE). Insurers tell AIS Health, a division of MMIT, that they are taking proactive steps to manage redeterminations, including coordinating with providers, liaising with state agencies and stepping up member contacts to ensure that beneficiaries don’t lose coverage unnecessarily. 

During most of the COVID-19 pandemic, Medicaid did not check on beneficiaries to see whether they were eligible for enrollment. That’s because, throughout the COVID-19 PHE, states have received a 6.2 percentage-point increase in Medicaid funding — known as the Federal Medical Assistance Percentage (FMAP) — in exchange for maintaining continuous enrollment of nearly all Medicaid enrollees. Medicaid normally requires members to periodically document their income and demonstrate that they don’t earn more than Medicaid beneficiaries are allowed to make. 

Blue Cross Blue Shield of Michigan this year launched full-risk reimbursement arrangements with six physician groups in the state. The deals cover members enrolled in the insurer’s Medicare Advantage PPO and Blue Care Network MA plans. 

The provider organizations have worked with BCBS of Michigan since 2020 on shared-risk models, but this adds more risk and reward. The agreements tie the provider groups’ payments to how well the physicians manage the costs of treating their patients and improve clinical outcomes. 

Centene Corp. had a tough fourth quarter in 2022, with the insurer posting a $282 million loss for the period. The company’s executives attributed the rough ride to high administrative costs and lower-than-expected enrollment in Medicare Advantage. However, the firm posted solid results over the whole of 2022. Wall Street seems wary of Centene’s prospects over the next year, with analysts identifying notable challenges during 2023.  

Centene took in $35.6 billion in revenue in the fourth quarter, up 9% year-over-year from 2021; total revenues in 2022 were $144.54 billion, up 15% from 2021. Net earnings for 2022 were $1.2 billion, or $2.07 in diluted earnings per share (EPS). The firm posted a loss of $0.38 per share during the fourth quarter of 2022. Medical loss ratio (MLR) was 87.7% in 2022, down from 87.8% in 2021. However, full-year earnings were dampened by selling, general and administrative expenses (SG&A), which increased from 7.9% in 2021 to 8.4% on an adjusted basis.