Last summer, Long Beach managed care company Molina Healthcare Inc. appeared to score a huge coup, snagging Medi-Cal contracts that could bring in an additional 1.4 million enrollees and up to $6 billion in new revenue.
The crown jewel of the contract wins: 1 million new enrollees in Los Angeles County that are currently being served by Woodland Hills-based Health Net of California, a subsidiary of St. Louis-based health care giant Centene Corp.
But last month, the state agency that had preliminarily awarded the contracts to Molina scaled back the gains in its final contract award announcement. The biggest change was splitting up the L.A. County pot with incumbent Health Net.
Molina still stands to double its Medi-Cal enrollees from the current 600,000 to 1.2 million and, according to its Chief Executive Joseph Zubretsky, still expects to gain $3.9 billion in revenue from the final Medi-Cal contract awards.
“This confirmation of significant growth represents an important step forward for our enterprise, doubling our presence in the state of California,” Zubretsky said in the company’s announcement. “We are very pleased with the contribution these awards will make to our significant enterprise growth, the trajectory of which remains intact.”
The reduction in Molina’s potential gains meant a sigh of relief from Centene and its HealthNet subsidiary. HealthNet will lose only half of its current enrollee base in L.A. County, and it also picked up some enrollees in the Sacramento area — though not at Molina’s expense.
HealthNet had protested the preliminary award and filed a lawsuit in October against the California Department of Health Care Services, the agency overseeing the Medi-Cal contract awards. But in the wake of the agency’s Dec. 30 contract award revisions, Centene announced that HealthNet was dropping its litigation.
“We are pleased to have been issued contracts by DHCS and look forward to pioneering new and innovative approaches to improve access to quality care and drive health equity for the millions of members we serve,” Brian Ternan, Health Net’s chief executive, said in the Centene reaction announcement to the award revisions.
That announcement also said Centene was raising its overall 2024 earnings guidance as a result of the Medi-Cal award revisions, boosting the guidance by 15 cents to $7.15.
Interestingly, the share prices of both Molina and Centene dropped about 3% on Jan. 3, the day the Medi-Cal contract revisions became widely known to the public. Those drops outpaced the slight declines in the broader markets for that day of between 0.4% and 0.8%.
Molina shares continued their slide on Jan. 4, falling 1.7% to close at $313.53. Centene shares fell 0.4% on Jan. 4 to close at $79.46. These drops, though relatively small, contrasted with the slight gains recorded in the broader markets on Jan. 4 of between 0.4% and 0.8%.
