Centene Corporation · NYSE:CNC
Centene — Investor Day (December 2015)
106 slides from Centene's investor day presentation, Dec 18, 2015
Slide 1: 2015 Investor Day Welcome
SSID: Centene Corporation Password: welcome2015 2015 Investor Day December 18, 2015 Welcome
Slide 2: Welcome & Introduction
Welcome & Introduction Ed Kroll, SVP - Finance and Investor Relations
Slide 3: Forward-Looking Statements
Forward-Looking Statements During the course of this presentation, we may make projections or other forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclai
Slide 4: Earnings Guidance Policy
Earnings Guidance Policy Our Company’s policy is, “that the Company undertakes no obligation to update its earnings guidance, other than as part of its quarterly or yearly earnings disclosure, and that silence on guidance by the Company or Company officials should not be interpreted that guidance ha
Slide 5: Strategic Overview
Strategic Overview Michael F. Neidorff, Chairman, President & CEO
Slide 6: Centene Today
Centene Today 2015 Premium & Service Revenues People Capabilities Technology Guidance FORTUNE’S Fastest Growing FORTUNE Companies (2015) 6
Slide 7: 2015 Growth
2015 Growth 35% Growth in Premium & Service Revenues* 31% Growth in EPS* 19% Increase in Stock Price * Represents growth from the guidance mid-point; EPS excludes Health Net merger related expenses. 7
Slide 8: 2016 Guidance
2016 Guidance Total GAAP Earnings Per Revenues Diluted Share Growth Adjusted Earnings Per Rate Diluted Share * For the purpose of providing guidance, it is assumed that the Health Net acquisition closes February 1, 2016. 8
Slide 9: Continued Operational Success
Continued Operational Success Strong and Balanced Results Diversification Insurance Strategy Group Specialty Business Unit Executing on Growth Pipeline and Capital International Investments 9
Slide 10: Local Integrated Approach
Local Integrated Approach Health Plan Operations Health Care Enterprise and Specialty Companies Better Assist in Serve our Controlling Members Costs 10
Slide 11: Leading Information Systems
Leading Information Systems Better management Design and invest in of health care costs information systems and innovative care versus simply management programs influencing them 11
Slide 12: International Investments
International Investments Generated new opportunities Diversifies product portfolio Provides services to 850,000 individuals Exploring targeted opportunities 12
Slide 13: Growth Strategy: M&A
Growth Strategy M&A Disciplined approach to M&A investments 13
Slide 14: Growth Strategy: Pipeline
Growth Strategy Pipeline Robust near and long-term diversified pipeline 14
Slide 15: Health Net Acquisition
Health Net Acquisition Announced July 2, 2015 Received early termination of the waiting period under HSR Shareholder approval obtained OR Form A approval was issued on November 30th (starting the 60-day waiting period) Currently working through the regulatory process in California and Arizona 15
Slide 16: Health Net
Health Net Builds critical Further diversifies mass and markets and expertise products Veterans Medicare TRICARE Affairs 16
Slide 17: Health Net
Health Net Leading platform of government- sponsored programs Largest Medicaid MCO Total Membership: 10+ million (6+ million Medicaid members) Growth & Enhanced Service Offerings Leader in Managed Long-Term Support Services (MLTSS) 17
Slide 18: Health Net
Health Net Expands opportunities beyond the Dual eligibles Medicare Advantage expertise Creates significant growth opportunities across our markets Low-income Medicare opportunity of $150+ billion in current markets 18
Slide 19: Health Net
Health Net Value Based Further Deploy Contracting Specialty Solutions Health Insurance Marketplace 15 500,000 (HIM) presence States Members Committed to the California Commercial Market Stronger Financial Profile 19
Slide 20: Well Positioned for the Future
Well Positioned for the Future 2016 Successful Growth Disciplined 2015 Company Growth 20
Slide 21: Guidance
Guidance Jeff Schwaneke, SVP, Corporate Controller & CAO
Slide 22: 2015 Guidance
2015 Guidance ($ IN MILLIONS, EXCEPT SHARE DATA) Low High Premium and Service Revenues $21,000 $21,300 Diluted EPS* $2.90 $2.94 HBR% 89.2% 89.4% G&A%* 8.2% 8.4% Effective Tax Rate 48.0% 50.0% Diluted Shares (in thousands) 123,000 123,500 * Excludes between $0.13 and $0.15 per diluted share of merger
Slide 23: Key 2016 Guidance Assumptions
Key 2016 Guidance Assumptions • Health Net Transaction closes on February 1st, 2016. • New transaction intangible assets of $1.5 billion amortized over 10 year average life. • GAAP EPS guidance includes transaction costs. • Synergy realization consistent with expectations. • We do not have any busin
Slide 24: 2016 Guidance
2016 Guidance ($ IN MILLIONS, EXCEPT SHARE DATA) Low High Total Revenue $41,200 $42,000 GAAP diluted EPS $2.85 $3.15 Adjusted diluted EPS $4.10 $4.40 Adjusted earnings per diluted share excludes: • total intangible amortization of $0.55 to $0.60 per diluted share. • approximately $0.65 to $0.70 per
Slide 25: Insurance Group
Insurance Group Rone Baldwin, EVP - Insurance Group Business Unit
Slide 26: Overview
Overview Scale Health Dual and Insurance Demonstration Diversification Marketplace Program 26
Slide 27: Increasing Scale and Diversification: 2010
Increasing Scale and Diversification 2010 HEALTH PLANS BY PREMIUM SIZE 4 3 1 <$300 million $300 million - >$1 billion $1 billion 27
Slide 28: Increasing Scale and Diversification: 2015
Increasing Scale and Diversification 2015 HEALTH PLANS BY PREMIUM SIZE 7 7 6 <$300 million $300 million - >$1 billion $1 billion 28
Slide 29: Increasing Scale and Diversification: 2016 with Health Net
Increasing Scale and Diversification 2016 WITH HEALTH NET HEALTH PLANS BY PREMIUM SIZE 12 5 3 <$300 million $300 million - >$1 billion $1 billion 29
Slide 30: Health Plans and Program Participation 2010
Increasing Scale and Diversification 2010 HEALTH PLANS AND PROGRAM PARTICIPATION 8 6 1 3 0 0 0 Medicare LTSS/IDD Medicaid Exchanges DSNP/ ABD TANF/CHIP Advantage Expansion Duals 30
Slide 31: Health Plans and Program Participation 2016
Increasing Scale and Diversification 2016 WITH HEALTH NET HEALTH PLANS AND PROGRAM PARTICIPATION 17 15 15 11 10 8 3 Medicare LTSS/IDD Medicaid Exchanges DSNP/ ABD TANF/CHIP Advantage Expansion Duals 31
Slide 32: Benefits of Scale and Diversification
Benefits of Scale and Diversification Closer relationships Leadership position in • State customers numerous states • Providers Economies of scale 1st 2nd 3rd • Shared best practices in 5 states in 6 states in 4 states Program sustainability 32
Slide 33: Health Insurance Marketplace
Health Insurance Marketplace Strategy • Focus on lower income, subsidized and members Execution • Selective service areas – build a sustainable position • Disciplined approach to pricing • Target margin of 3-5% • No risk corridor assumed • Internal team, outside actuarial support from two firms • Sa
Slide 34: Health Insurance Marketplace
Health Insurance Marketplace Strategy • Financials in line or exceeding and expectations Execution • Risk adjustment payable, risk corridor payable and MLR rebates in 2014 and 2015 • No recent change in claims or utilization in 2015 • Member demographics unchanged • Member attrition in line • HBR fo
Slide 35: Health Insurance Marketplace
Health Insurance Marketplace Strategy • Utilization not showing any recent and changes 1.5 Execution 1.25 2015 Inpatient Utilization 1 0.75 0.5 Jan Feb Mar April May June July Aug Sept Oct Nov • 3R accrual methodology • Reinsurance and risk corridor: actual experience • Risk adjustment: leverage ind
Slide 36: Health Insurance Marketplace Membership
Health Insurance Marketplace Health Insurance Key Growth Drivers Marketplace Membership • Existing states market growth / ~500K w/ Health Net additional penetration FL GA IL IN MA AR MS OH TX WA WI OR • New state in 2016 – private option Medicaid expansion NH 155K • With Health Net - ~500,000 member
Slide 37: Dual Demonstration Program
Dual Demonstration Program Dual Demo Program Highlights Membership • Strategic program for long term ~50k w/ duals opportunity - - $250B + Health Net opportunity • Stabilizing membership and opt out • Focus beyond start up - - • Care management • Provider experience 28K • Lower cost, better quality
Slide 38: Reaping Benefits from Scale and Diversification
Reaping Benefits from Scale and Diversification Positioned to Grow Exchanges; Dual Demo Focus on Cost & Quality Acceleration with Health Net 38
Slide 39: Specialty Business Unit
Specialty Business Unit Jesse Hunter, EVP & Chief Business Development Officer
Slide 40: Specialty Business Update
Specialty Business Update Premium and Service Revenue $8.00 $7.00 External Internal $6.00 $5.00 $4.00 32% 880 $3.00 External $2.00 68% Customers $1.00 $- 2011 2012 2013 2014 2015(F) Recent Awards • Nurtur: Asthma Management – Case In Point Platinum Award • NurseWise: Nurse call center program – Case
Slide 41: Health Net Impact on Specialty
Health Net Impact on Specialty Significant Leverage Opportunity For Specialty Services (focus area for synergy capture) Common Insourced Capabilities Health Net Outsourced Services • Behavioral health • Dental • Correctional services • Nurse triage • Pharmacy management • Vision • Wellness and disea
Slide 42: Centene's Specialty Health Solutions
Centene’s Specialty Health Solutions Pharmacy Care Management Benefits Software Specialty Pharmacy Health Management Benefits Technology Life, Health In-Home Services & Wellness Telehealth Vision Benefits Services Behavioral Health & Dental Benefits Specialty Therapies HCBS for I/DD Correctional Pop
Slide 43: Market Dynamics
Market Dynamics Change in stakeholder Centene Specialty landscape Solutions Well Customers want more Positioned to services from fewer vendors Address Market Needs Centene partner demand 43
Slide 44: It Starts with a Name…
It Starts with a Name… The name Envolve reflects our determination to help people, organizations and the healthcare system EVOLVE and change for the better. Because we know we’re not in it alone, Envolve also embodies the spirit of INVOLVEMENT, from engaged service providers to self-empowered member
Slide 45: One Brand – Three Focus Areas
One Brand – Three Focus Areas 45
Slide 46: Vision for Integrated Solutions
Vision for Integrated Solutions • Apply “All Products, All Markets” approach to external customers • Continuum of integrated capabilities – Deploy services vs. tools TARGETED SALES CHANNELS Payor Pharma Provider Employer Integrated Management Medication ACO Support, Wellness and Services, Adherence
Slide 47: Culture of Innovation within Envolve
Culture of Innovation within Envolve R&D Lab Objective Bridging Gap Between Delivers innovations that create new Academia and Real Life markets or value systems • Behavioral economics insights • Inter-generational lifestyle change Success Measures program • Unbounded solution to defined problem set
Slide 48: Envolve – Integrated Capability Platform
Envolve – Integrated Capability Platform Strong operating performance from Strong specialty segment Performance Integrated Broad spectrum of integrated capabilities Capabilities Building momentum on integrated sales Building under Envolve Momentum 48
Slide 49: International
International Cynthia Brinkley, EVP - International Operations & Business Integration
Slide 50: Establishing Our Robust International Platforms
Establishing Our Robust International Platforms 2014: Entered into Spain and UK through acquisitions of non-controlling interests in Ribera Salud and the Practice Group Integrated healthcare coverage under Primary and specialty care services public-private partnership arrangements through one of the
Slide 51: Establishing Our Robust International Platforms
Establishing Our Robust International Platforms 2015: Advancing and expanding our international platforms for future growth Ribera Salud increased its ownership and control in three Valencian concessions Constructive knowledge transfer and deployment of advanced care management systems Increased exp
Slide 52: Becoming a Trusted Partner of International Governments
Becoming a Trusted Partner of International Governments Deliver improved health outcomes Integrated Health at lower costs through a suite of Solutions locally based healthcare solutions Leverage our extensive health and Extensible Health social care capabilities to emerging managed care opportunitie
Slide 53: Aligning Our Local Platforms for Continued Success
Aligning Our Local Platforms for Continued Success Modest Conservative approach to assessing investments and developing new opportunities Collaboration with local expertise to Strong Local navigate foreign political & market Partners dynamics Strong leadership and management Experienced Local experi
Slide 54: Session Q & A
Session Q & A
Slide 55: 2015 Investor Day Break
SSID: Centene Corporation Password: welcome2015 2015 Investor Day December 18, 2015 Break
Slide 56: Medical Affairs
Medical Affairs Ken Yamaguchi, MD EVP, Chief Medical Officer – Medical Strategies
Slide 57: Why Managed Care, Why Centene?
Why Managed Care, Why Centene? 57
Slide 58: Quote from Michael Neidorff on quality and cost
“We are firm believers that when it comes to a medical decision, the highest quality choice is also the most cost effective…....” Michael Neidorff, Chairman, President & CEO 58
Slide 59: Physicians must be practicing clinical medicine
Every physician at Centene must be practicing clinical medicine…..They must be connected to patient care and empathetic to the needs of providers and members….. 59
Slide 60: Proven Methodology
Proven Methodology Proven methods for addressing a wide range of healthcare concerns: • Adaptable to diverse populations and disease states • Successful clinical program framework • Innovative applications of Centene tools • Predictive modeling Cost of disease avoidance trumps Goal: cost of disease
Slide 61: Medical Management Principles
Medical Management Principles Quality Care Strong Leveraged Partners w/ Technology Community Resources Balanced Member approach w/ Engagement Providers Better High-Touch Evidence- Health with Based Members Outcomes, Medicine Lower Costs Holistic, Integrated Approach 61
Slide 62: Guidelines Assure We Are True to Principles
Guidelines Assure We Are True to Principles High Touch Quality Evidence-based with Members Care Medicine • Emphasize Mission! • Dedication to improved • Protocol Reviews • Holistic Approach HEDIS scores and STARS • Robust Analytic Structure measures • Evolving training program • Bioinformatics • Pro
Slide 63: Integrated Care Management
Integrated Care Management Member-centric Whole-person Impact-driven • One primary care • Clinical, behavioral, • Data driven manager social • Better outcomes • Increase impact • Unified member • Measureable & • Decrease variation management platform Improved ROI • Member input • Provider transparen
Slide 64: Setting Up a Program for Success
Setting Up a Program for Success Comprehensive approach to combating disease Develop Identification: Measuring Strategy For Execution CentelligenceTM Outcomes Results • Predictive • Evidenced-based • Case management modeling guidelines • Disease management • Innovation • Strong clinical policy • Qua
Slide 65: Medical Program Awards: 2015
Medical Program Awards: 2015 • Nurtur: Asthma Management – Case In Point Platinum Award • CelticCare: ICM – Case In Point Platinum Award • Buckeye Health: Pregnancy Specialty Care Management – Case In Point Platinum • NurseWise: Nurse call center program – Case in Point Platinum • Home State Health:
Slide 66: Future Directions
Future Directions Robust Best-Practice Rigorous, Measurable Big Data - Medical Policies Study Protocols Bioinformatics • Strong evidence basis • Analytics infrastructure • Quality data • Expert opinion • Disciplined protocol • Organized into oversight useable form • Academic partnerships 66
Slide 67: Long-Term Vision
Long-Term Vision “To help develop and broaden Medical Affairs at Centene such that it becomes the industry standard for improving the lives and health of people….” 67
Slide 68: Organizational Update
Organizational Update Michael F. Neidorff, Chairman, President & CEO
Slide 69: A Look At: Centene 2.0
A Look At: Centene 2.0 PRODUCTS AND SPECIALIZATIONS Focused on growth, strategy and performance across all markets GEOGRAPHIC MARKETS Focused on growth and continuous innovation, with P&L ownership GLOBAL SERVICE SUPPORT Regional Service Centers: transactional services performed regionally, leveragi
Slide 70: 2.0 Organization Structure
2.0 Organization Structure 70
Slide 71: Health Net Integration Planning Update
Health Net Integration Planning Update Cynthia Brinkley, EVP - International Operations & Business Integration
Slide 72: Diversified Revenue Stream Before and After Acquisition
Diversified Revenue Stream Before After Health Net Acquisition Health Net Acquisition 3% 4% 1% 2% 11% 8% 8% 16% 83% 64% Medicaid Commercial / Exchanges Medicare Specialty / Government Duals 72
Slide 73: Comprehensive Integration Structure
Comprehensive Integration Structure Integration Coordinated planning Management Office and rigorous approach, for prompt execution A central body to manage, guide, of integration plans monitor synergies and support upon close integration teams Integration Teams Identify and Accelerate Growth and Cos
Slide 74: Integration Roadmap
Integration Roadmap Announced Shareholder CA Department of July 2, 2015 approval received Insurance hearing set for January 22nd Regulatory Approval Early termination of State regulatory approvals Anticipated close Hart-Scott-Rodino received from Cayman Islands, of acquisition waiting period TX, NJ,
Slide 75: Growth and Diversification
Growth and Diversification Jesse Hunter, EVP & Chief Business Development Officer
Slide 76: Areas of Focus
Areas of Focus Market Size Pipeline and Pipeline 2016/2017 Growth 76
Slide 77: Market Size by Product
Market Size by Product JUNE 2015 INVESTOR DAY Medicaid & CHIP $612B Medicare (Duals) $234B $959 Health Insurance $104B billion Marketplace Correctional Healthcare $9B 77
Slide 78: Pipeline
Pipeline JUNE 2015 INVESTOR DAY Medicaid Health Insurance & CHIP Marketplace Medicare Correctional (Duals) Healthcare $140 billion 78
Slide 79: Market Size by Product
Market Size by Product Health Medicaid Insurance Correctional Medicare & CHIP Marketplace Healthcare $616B $728B $104B $9B $1.46 trillion Specialty Federal International Services Services 79
Slide 80: Pipeline
Pipeline Health Medicaid Correctional Medicare Insurance & CHIP Marketplace Healthcare $205 billion Specialty Federal International Services Services 80
Slide 81: Areas of Focus
Areas of Focus Market Size and Pipeline 2016/2017 Growth Growth Opportunity Categories 81
Slide 82: 2016 Revenue Growth Drivers
2016 Revenue Growth Drivers INCLUDED IN GUIDANCE Health Net Full Year of Centurion (MS) Full Year of LA and OR Health Insurance Acquisitions Marketplace Expansions Full Year of Benefit/ Full Year of MMP Population Expansions (MI, SC, TX) (AZ, IL, IN, LA, MS, TX, WA) 82
Slide 83: Potential 2016 Revenue
Potential 2016 Revenue NOT INCLUDED IN GUIDANCE New Medicaid states New RFPs New Medicaid Expansion states New M&A Opportunities 83
Slide 84: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 84
Slide 85: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 85
Slide 86: All Products, All Markets
All Products, All Markets Government Solutions AZ AR CA FL GA IL IN KS LA MA MI MN MS MO NH1 OH OR SC TN TX VT WA WI TANF ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Medicaid Expansion ● ● ● ● ● ● ● ● ● CHIP ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ABD (non-duals) ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ABD (Medicaid only dual-elig
Slide 87: Existing Markets: Arkansas
Existing Markets ARKANSAS • The Arkansas Health Reform Legislative Task Force provided a recommendation to implement Managed Care for Special Needs populations • Expect possible RFP for a managed care program in Q3 2016 87
Slide 88: Existing Markets: Arizona, Missouri
Existing Markets ARIZONA • ALTCS Reprocurement • Go-Live November 1, 2017 MISSOURI • MO HealthNet Reprocurement • Expansion statewide for existing program 88
Slide 89: Existing Markets: Massachusetts, Louisiana
Existing Markets MASSACHUSETTS • MassHealth reprocurement • 770,000 eligibles LOUISIANA • MLTSS RFI issued in 2013 • Stakeholder engagement (2014- 2015) • 70,000 eligibles • Medicaid Expansion 89
Slide 90: Existing Markets: Medicaid Expansion
Existing Markets MEDICAID EXPANSION • Combined Medicaid Expansion membership: ~1 million members • 31 markets including D.C. expanded Medicaid • 20 States have not expanded • ~3.9 million individuals could be Centene/Health Net Market eligible for Medicaid in Centene Expanded Medicaid markets that h
Slide 91: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 91
Slide 92: New Markets: Pennsylvania
New Markets PENNSYLVANIA • HealthChoices: (Go-Live January 1, 2017) • 1.9M members (5 Zones: 3-5 plans per zone) • Community HealthChoices: Draft MLTSS/Duals RFP out (Phase 1 Go-live January 1, 2017) • 450k members (5 Zones: 2-5 plans per zone) • Phased-in over three years 92
Slide 93: New Markets: Nebraska, Virginia
New Markets NEBRASKA • Heritage Health: (Go-Live January 1, 2017) • Statewide – All populations included; Dental and LTSS carved- out • 230k members VIRGINIA • MLTSS: (Phased-in Go-Live starting January 1, 2017) • Prepared an 1115 Waiver for MLTSS • 130k members 93
Slide 94: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 94
Slide 95: Managed Care Expansion States: Alabama
Managed Care Expansion States ALABAMA • Alabama is establishing a capitated managed care system through regional care organizations (RCOs) • An RCO is a corporate entity established under state law that is governed by a Board of Directors representing providers, the public, and investors • 670,000 e
Slide 96: Managed Care Expansion States: North Carolina
Managed Care Expansion States NORTH CAROLINA • Legislation recently passed mandating full-risk managed care • 3 statewide MCOs/Provider Led Entities (PLEs) • Up to 10 Regional PLEs • All populations except duals • Earliest go-live: 2018 96
Slide 97: Managed Care Expansion States: Oklahoma
Managed Care Expansion States OKLAHOMA • New ABD Program: Anticipate RFP in June 2016 (Go-Live TBD) • Statewide program covering 175k members (MLTSS carved-in two years later) 97
Slide 98: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 98
Slide 99: Medicare Advantage
Medicare Advantage • Intend to introduce Medicare Advantage plans in three existing markets • Targeting low-income MA enrollees (less than 400% FPL) • Leverage Centene local approach • Leverage Health Net value based contracting model 99
Slide 100: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 100
Slide 101: M&A Strategic Objectives
M&A Strategic Objectives CONSISTENT CRITERIA & FINANCIAL DISCIPLINE M&A targets that add capabilities for Capability existing service offerings Add scale to existing operations and increase Scale our Medicare Advantage footprint Generating appropriate returns on our Value investments for our shareho
Slide 102: Representative 2017+ Growth Categories
Representative 2017+ Growth Categories Existing Markets New Specialty Markets Growth Verticals Managed M&A Care Expansion Medicare Advantage 102
Slide 103: Envolve Sample Clients
Envolve Sample Clients • Health Plan • A medication • Management management adherence program services for services for for a weekly injectable Alabama Healthcare Medicaid therapy for on-label Advantage’s beneficiaries in NY high risk pregnancies government sponsored business 103
Slide 104: Growth Outlook
Growth Outlook Centene will Additional Health Net capabilities continue to • Medicare Advantage be a growth • Federal Services company Health Net increases addressable markets by ~$500B and pipeline by $65B Significant additional growth opportunities in 2016 and 2017 104
Slide 105: Session Q & A
Session Q & A
Slide 106: 2015 Investor Day Thank You!
SSID: Centene Corporation Password: welcome2015 2015 Investor Day December 18, 2015 Thank You!