Centene sold its merger with Health Net in 2015 as a mega-deal that will greatly benefit its investors. But upon completion of the takeover in 2016, the truth came out – Health Net had its hands full with financial liabilities, and Centene shareholders ended up massively disappointed.
Centene CEO Michael Neidorff pushed for the corporate marriage and insisted that it was a compelling transaction. He promised that earnings per share would jump by at least 20% when the deal is signed and sealed. There is no way that shareholders will regret the move.
Besides, Neidorff assured that Centene would do its utmost vetting, and top of his priority was for the company to gain from the deal. It will not be cleared unless Health Net hurdles Centene’s rigid financial criteria, vowed the chief executive.
Neidorff Fed Nothing But Lies To Shareholders
The deal was pushed through and was completed in March 2016. However, Centene investors got the shock of their lives when the revelation was made in July that the Health Net deal came with liabilities, to the tune of $390 million.
Contradicting his earlier declarations, Neidorff confirmed the bad news to shareholders, and soon enough, the staggering losses started taking a form. Centene saw its rosy prospects for Health Net collapsed, and the giant insurer watched helplessly as the value of the shares plummeted.
Between the middle of 2016 and up to the end of 2019, the company continued bleeding, proving that Neidorff built the whole Health Net takeover on a foundation of lies. As facts started dropping in, it soon came out that he knew even before the deal’s finalization that Centene would take a hit but elected not to reverse course.
Neidorff’s strange behavior got its explanation when it was revealed that right before Centene admitted Health Net’s financial mess, the CEO sold off his shares. So, while investors absorbed the deal’s negative impact, Neidorff scooped up an estimated $20 million from the stock sale.
The Rush To Stop Further Damage On Centene
By December 2019, Neidorff announced that Centene would take a hit of $500 million due to the delays on a contract agreement in North Carolina. The loss was on top of the $1 billion hit incurred in 2016 due to Neidorff’s misstep in California, which is the disadvantageous move to buy out Health Net.
In order to stop the damage from further deteriorating, Centene implemented a plan to cut down the company’s expenditures. The most immediate action was the blanket denial or underpayment of certain payment claims. This decision specifically targeted mental treatment centers. Arbitrarily, changes were made to existing policies to justify the non-payment, and Neidorff approved these measures for the financial benefit of Centene.
In the end, the patients dealing with behavioral issues and substance use found themselves stripped of health insurance. They became casualties to Neidorff’s misfiring tactic. The Centene CEO made a wrong business move and corrected his mistake. In doing so, however, he did not hesitate to let the innocent suffer.
