Coventry Health Care Inc. (CVH”>CVH) announced the closure of its acquisition of Children’s Mercy’s Family Health Partners, a Medicaid health plan. The health plan was previously offered by Children’s Mercy Hospital.
The financial terms of the deal, which was initially announced in October 2011, were not disclosed. However, Coventry expects the purchase to have a modest positive effect on its 2012 earnings.
Moreover, the acquisition will boost Coventry’s Medicaid membership by 210,000 in the combined Kansas and Missouri markets, taking its aggregate Medicaid enrollment to 900,000. Family Health Partners currently occupies the number one position in the Medicaid market in Kansas with about 155,000 policy holders.
Concurrently, Children’s Mercy Hospital inked a long-term partnership deal in order to provide hospice and physician services to the members of Coventry’s health plans.
Over the past two years, Coventry has been slowly expanding its business through acquisitions. In October 2010, the company acquired Mercy Health Plans (MHP) and its subsidiaries from Sisters of Mercy Health System, thereby increasing its policy holders in the Missouri and Arkansas regions by 180,000.
Earlier, in February 2010, Coventry completed the acquisition of Preferred Health Systems Inc., which along with MHP added almost $1.0 billion to its annualized revenue. The company revealed that its strategy to grow through acquisitions has yielded returns by increasing its annualized Medicaid revenue to almost $2.5 billion from $1.1 billion in 2009.
WellPoint Inc. (WLP”>WLP), a competitor of Coventry, is also expanding through acquisitions. In August 2011, the company completed the acquisition of a privately held Medicare specialist – CareMore Health Group. The deal was intended to expand its presence in the U.S. government program for the elderly.
Coventry currently carries a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are retaining our Neutral recommendation on the shares.
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