The proposed $6.8 billion acquisition of Health Net Inc. by St. Louis-based Centene has received its first greenlight on its way to final closure.
The California Department of Managed Health Care announced Tuesday that it has approved the sale of the insurer, with conditions. Among them, the headquarters of the Woodland Hills-based company must remain in California and the combined company must make several improvements to quality of care and access.
Shelley Rouillard, department director, said the imposition of these conditions “will improve both plan performance and care for California’s members.”
“I feel good about the investments we have obtained and the quality improvement plans they are committed to,” she told
California Healthline. “We will be monitoring this over the coming years to ensure they carry out their commitments.”
The agreement is the first of two California regulatory deals Centene needs to finalize its purchase of Health Net. The other comes from the Department of Insurance, which has not yet released a timetable for its decision.
Regardless, Ana Gupte, a healthcare analyst with Leerink Partners in New York, says the Managed Health Care Department’s signoff will put pressure on the Department of Insurance to approve the transaction.
Centene has released a statement saying it expects to close the transaction shortly after the insurance department does sign off.
Currently, the department is scheduled to conduct a public hearing on another pending health insurance merger – the $54 billion transaction between Anthem and Cigna – on March 29.
Full conditions under terms of the deal, according to the Department of Managed Health Care, include:
- A $200 million service center in an “economically distressed” area of California by Centene that will create at least 300 jobs
- A requirement that Health Net’s key function and operations remain in California, including its current Woodland Hills headquarters
- Improvement in quality of care measures and oversight
- The creation of a $65 million program to improve the health outcomes of enrollees
- An additional $75 million commitment to the state’s healthcare infrastructure for under-served groups.
Approval by these two California groups are the last the deal needs to finalize.
