Back to top

Analyst Blog

In an effort to consolidate its foothold in New Jersey, WellCare Health Plans, Inc. agreed to acquire some of the assets of Healthfirst Health plan of New Jersey, Inc. (Healthfirst NJ) for an undisclosed amount.

Healthfirst NJ is a subsidiary of Healthfirst, a health insurance organization based in New York. As of Sep 2013, Healthfirst NJ attends to 47,000 Medicaid members residing in 12 counties in New Jersey.

Headquartered in Tampa, FL, Wellcare provides managed care services target to approximately 2.8 million members across the U.S. Its operations are targeted to government sponsored health care programs, focusing on Medicare and Medicaid.

In addition, the state of New Jersey approved WellCare’s plans to offer its Medicaid managed care in Hudson, Essex, Passaic, Middlesex and Union counties effective Dec 1, 2013. This in turn is expected to ramp up the company’s organic growth profile. However, approval by the centers for Medicare & Medicaid services (CMS) for the contract is still pending.

With the acquisition of Healthfirst NJ, New Jersey will be the ninth U.S. state for the expansion of Wellcare’s managed care services. This transaction will enhance WellCare’s medical service portfolio in New Jersey, where it already serves approximately 14,000 Medicare Prescription Drug Plan members and 2000 Medicare advantage members. The acquisition is targeted to deliver more cost-effective and quality health care solutions to the company’s existing and potential customers in the state.

As per the Affordable Care Act, a health reform law passed by Barack Obama in the United States, lower income people will be eligible to receive Medicaid services in the country. WellCare is expected to benefit through an enrolment growth in New Jersey, with the law extending to the state of New Jersey as well.
 
Following the acquisition, Healthfirst NJ’s physician rosters and members will be taken over by WellCare. Healthfirst NJ will then wind down its operation. WellCare stated that neither Healthfirst NJ’s current members nor the company’s New York operations will be impacted owing to this acquisition.

The acquisition is expected to culminate in the first quarter of 2014, pending closing conditions. WellCare expects the acquisition to be accretive to its 2014 net income. The Zacks Consensus Estimate for 2014 is currently pegged at $5.47, reflecting a year-over-year increase of nearly 12%.

The stock market also reacted positively to the news of the acquisition. Shares of WellCare gained nearly 0.9% to close at $69.74 yesterday.
 
WellCare Health has consistently adopted inorganic routes to ramp up its growth profile. In September, WellCare announced its plans to acquire Windsor Health Group Inc. from German insurer Munich Re AG.

The Windsor Health acquisition complements WellCare Health’s Medicare and government health care plans, besides increasing its membership base and amplifying premium revenues. In April, the company closed the acquisition of Missouri Care, Incorporated, a subsidiary of Aetna Inc. for an undisclosed amount.

Among others in the space, Humana Inc. entered into an agreement to acquire American Eldercare Inc. for an undisclosed amount in Jul 2013. Magellan Health Services, Inc. inked a deal to acquire Partners Rx for $100 million last month.

There was no earnings estimate momentum over the last 7 days. With optimism over the latest acquisition, we expect analysts to raise estimates, exerting upward pressure on the Zacks Rank. WellCare presently carries a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.