WellCare Boasts 4M Members
WellCare Health Plans' stock shot up 7 percent Wednesday after the release of a third-quarter earnings report that showed membership now exceeds 4 million. That's up from 2.8 million members at the same time a year ago, a jump of 43 percent.
The share price topped $70 for a couple of hours, the first time that has happened since WellCare stock tanked on July 25 at the news that the company would not meet its original financial goals for the year.
Net profit for the quarter that ended Sept. 30 -- while much lower than a year ago -- was higher than expected, at 77 cents a share. That may have cheered investors, or maybe they just like Drew Asher.
The 46-year-old former Aetna executive, who came to WellCare in September as a senior vice president, will replace Chief Financial Officer Tom Tran next Friday, as previously announced. Asher handled much of the conference call with market analysts Wednesday morning.
In a note soon afterward, Stifel's Tom Carroll called Asher "no nonsense." He said Asher's grasp of the business was obvious and predicted that he will improve operations at the Tampa-based company.
Much of the talk in the earnings call was about Florida, because it accounts for $3 billion of the company's annual revenue, according to Company Chairman and CEO Dave Gallitano. He said he was "very pleased" with this year's rollout of the Florida Medicaid overhaul, called the Managed Medical Assistance program, or MMA.
The new members the MMA brought in pushed the total Florida Medicaid membership up to over 700,000, Gallitano said, cementing the company's long-held number-one position in the market. While pleased about that, he said, "we need to improve the financial performance of this program."
One driver of medical spending, Gallitano said, was Florida Medicaid's decision to require plans to honor an "open formulary" for prescription drugs, rather than allow them to limit the list. Gallitano said WellCare executives are talking with Medicaid officials at the state Agency for Health Care Administration about it.
Part of the drug-cost problem was resolved, Gallitano said, with the state's agreement to help plans pay for the new hepatitis C drug, Sovaldi. The basic 12-week course of treatment with the drug costs about $84,000, a price that its manufacturer justified by saying it has a 90-percent cure rate and forestalls a liver transplant.
Because health plans submitted their Medicaid bids to AHCA before the Food and Drug Administration approved Sovaldi, the state agreed to a special "kick payment" to health plans to make up the difference.
The new Florida Medicaid MMA members, who had not been in managed-care plans before, generate a $2 billion revenue stream but also a level of medical spending that is "not satisfying or sustainable," Asher said. But it's only temporary as the new members adapt to managed care, he said.
Gallitano said the company responded by trimming doctor networks in return for beefing up pay, and offering "collaborative models" to control spending, an apparent reference to shared financial risks and rewards.
In other news, Asher offered a piece of good news to the public company's investors: As hoped, state Medicaid programs have agreed to pay the fees assessed on health plans under the Affordable Care Act. The Medicare Advantage health-plan tax is one of the issues that drew criticism during debate on the law, which was passed in spring 2010.
Also, Gallitano announced that WellCare will host its first-ever investor meeting in New York City on Feb. 17, 2015.
There was no mention in the call of the False Claims Act lawsuit unsealed last week, described in Health News Florida on Tuesday.
As for the financial report, premium revenue was $3.3 billion, up 35 percent. Net profit for the quarter was $19.3 million, far below the same period a year ago, when it was $64 million. For details, see WellCare's summary of its 8-K filing to the Securities and Exchange Commission.