When news came out in July 2015 that Centene Corp. was locked in merger talks with Health Net, the prospect of creating a giant insurance provider in the United States excited the market. The $6.8 billion deal was forged the following year and regulators gave their stamp of approval, not knowing that problems will soon emerge.
As anticipated, the marriage between Centene and Health Net was formalized in March 2016 and the new entity set out to operate as one the largest Medicaid-managed care provider in America. But the company will soon be bogged down by serious allegations of wrongdoings. Reports have indicated that it was a union hatched by greed-driven executives.
Signature Of Fraud All Over
In July 2016, or mere four months after the Centene-Health Net merger was greenlighted by the California government, the company issued an admission that the takeover was problematic right from the start. There were concerns that Health Net was hobbled by financial losses even before the merger talks were started.
In an ensuing lawsuit filed by Centene investors, it was revealed that Health Net was lugging along baggage too heavy to bear. Shareholders claimed in their filing that the smaller firm had ongoing issues – tax obligations that were left unpaid and legal disputes that were unsettled.
On top of these problems, Health Net was believed to be selling insurance products that failed to deliver the projected profits. In other words, when Centene initiated the move to take over Health Net, the target was from a healthy state.
Surprisingly, Centene conducted due diligence prior to the closing of the merger deal but for reasons that baffled shareholders, the company decided to withheld from investors the findings that were unearthed. It turned out that as of July 2016, Health Net was sitting on massive liability claims of $390 million.
Centene confirmed the figures and the result jolted the company – the share prices dipped considerably and shareholders belatedly realized that they got burned. They suffered losses no thanks to the decision made by top Centene executives to hide the fact that Health Net was out of shape.
Healthcare Providers And Patients Were Left Shell-Shocked
There were signs that Centene knew what was to descend following the merger deal. Likely at the behest of its incoming parent company, Health Net carried out a dragnet audit with the firm’s Special Investigations Unit (SIU) leading the effort. The aim, it seemed, was to review the transactions made before Centene’s looming takeover and Health Net SIU director Matthew Ciganek sent out letters to out-of-network substance abuse providers demanding medical documents.
The audit was completed in April 2016 and Ciganek made the decision to begin the “denials of payment for lack of medical necessity.” His move was concurred on by Dr. Matthew Wong, Health Net’s medical director. Many mental care providers in California absorbed the shock of Health Net’s maneuver and thousands of more patients have been left without adequate care just because Ciganek and Wong, acting in the interest of Centene and Health Net, denied them a lifeline.
Centene and Health Net rushed to stop their merged company from further hemorrhaging but in the process, their actions led to a terrible injustice. For many of the healthcare providers in question, it could mean the loss of their business. And the long-term consequence for the suffering patients could be more terrifying – the potential loss of lives.
