Molina Healthcare has entered into a definitive agreement to acquire certain assets related to the Medicaid and DSNP lines of business of Passport Health Plan.
The purchase price for the transaction is about $20 million, plus contingent consideration that's payable in 2021 based on Molina's Kentucky Health Plan's open enrollment results in 2020. Molina intends to fund the purchase with cash on hand.
WHAT'S THE IMPACT?
Molina Healthcare, a Fortune 500 company, provides managed healthcare services under the Medicare and Medicaid programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served upwards of 3.3 million members as of September 30, 2019.
The acquisition of Passport allows Molina to enhance operational readiness and promote continuity of care for members in advance of Molina's new contract award in the Kentucky Medicaid market.
The anticipated reduction in health plan startup costs, and the positive margin impact from incremental revenue, should allow Molina to recover the purchase price from positive cash flow within the first year following the acquisition.
As part of the transaction, Molina will acquire the Passport name – a well-known brand in Kentucky – and the company said it will also extend continued career opportunities for about 500 Kentucky-based Passport and Evolent Health employees.
Molina has agreed to operate the Passport Health Plan as soon as it has regulatory approval, with management and transition support services to be provided by Passport and its majority owner, Evolent Health, through the end of the 2020 calendar year.
The transaction is subject to regulatory approvals and other customary closing conditions, and is expected to close before the end of 2020.
THE LARGER TREND
The anticipated deal is the second acquisition Molina has pursued this year. In January, the company entered into a definitive agreement to acquire all of the capital stock of NextLevel Health Partners, a Medicaid managed care organization, for about $50 million.
As part of the transaction, Molina assumed the right to serve about 50,000 Medicaid and Managed Long-Term Services and Supports members in Illinois's Cook County, significantly expanding the managed healthcare services company's footprint in the state.
In 2017, the Molina Board of Directors fired its CEO and CFO due to the company's disappointing financial results. Molina Healthcare was active in the Affordable Care Act market, with former CEO J. Mario Molina, MD an outspoken opponent of the Republican plan to repeal and replace the Affordable Care Act.