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Barclays on U.S. Health Care- Managed Care: AGP, CNC, UNH and Private Companies Are Louisiana CCN RFP Winners

July 26, 2011 1:43 PM EDT Send to a Friend
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Barclays on U.S. Health Care- Managed Care: AGP, CNC, UNH and Private Companies Are Louisiana CCN RFP Winners

Barclays analyst says, "The Louisiana Department of Health & Hospitals announced thats it has awarded contracts to Louisiana Healthcare Connections (Centene), Amerihealth Mercy of Louisiana (Private) and AmeriGROUP of Louisiana (AMERIGROUP) (NYSE: AGP. In addition, the state named UnitedHealthcare of Louisiana (UnitedHealth Group) (NYSE: UNH) and Community Health Solutions of America (Private) as winners of the state's shared-savings program. Each plan will manage enrollment across the state's three geographical service areas (GSAs), with a combined 892K Medicaid lives as of February 2011. As this RFP is entirely expansionary (and not a reprocurement), this is an obvious incremental positive for Centene, AMERIGROUP and UnitedHealth. As we explain in greater detail below, we assume that enrollment and revenues will be split relatively evenly across the five winners, which certainly may not be the case. UnitedHealth's win of the shared-savings program is slightly different in that the company will receive fee revenue (AMERIGROUP and Centene will see typical risk premiums) but there is also a lower level of risk."

In total, six companies in our coverage universe placed bids according to the state; Aetna (NYSE: AET), Conventry (NYSE: CVH), and WellCare (NYSE: WCG)were unsuccessful. Additionally, three other non-public companies placed bids, with only Children's Hospital Health Plan, and Louisiana Cares Health Plan missing out on the awards.

Company-specific impact summary:
AGP: $0.05 in incremental EPS in 2012, $0.16 in total run-rate accretion thereafter CNC: $0.05 in incremental EPS in 2012, $0.17 in total run-rate accretion thereafter UNH: less than $0.01




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