Did Michael Neidorff, Centene’s CEO, made a huge mistake in pushing vigorously for the merger with
Health Net in 2016. Going by Health Net’s troubled history, such as the 2007 settlement case worth $215 million, it seemed that Neidorff made an ill-advised move five years ago.
Following Centene’s takeover of Health Net, it was revealed later that the corporate marriage was a stumble for Neidorff. The CEO later admitted that Health Net had financial liabilities, and his belated act cost Centene $1 billion in stocks wipeout. Had the chief executive bothered to check Health Net’s business practices in the past and followed his instinct, the foul up might have been avoided.
The record showed that Health Net was problematic – the company mishandled claims, and it was debtridden. Even more damning was an obstruction of justice case decided in 2007, in which the Californiabased company was made to pay a whopping $215 million.
Health Net committed a big slip then, and it foretold more blunders to come.
Health Net Plotted To Underpay The Insureds
The federal case that nearly bled Health Net dry involved two million complainants. A New Jersey judge found the company guilty of tampering with the Ingenix payment database to reduce the cost of claims filed by out-of-network care providers. According to the case record, the system is a standard in the national health insurance, and Health Net tried to manipulate Ingenix to justify its attempt of underpayment.
The facts of the case showed Health Net was caught and red-handed, and the company opted to settle, and they made the blockbuster payment. Also, the insurer agreed to make business adjustments that would cost another $40 million over the next five years. The incident did establish that Health Net tended to maneuver for financial gains and consequently break the law.
The legal case exposed serious flaws in the Ingenix system, and Health Net tried to leverage the situation for its gain. As the court noted, the company could have exercised “greater disclosure about the database use” but instead saw it fit to be dishonest. It was a costly mistake, which strangely escaped Neidorff’s eye or the CEO ignored the signs.
A Decade Later, Centene Paid $6 Billion To Buy Health Net
Health Net went on with its risky business practices after the settlement case, and by 2015, the company’s book had hundreds of million in liabilities. Notwithstanding, Centene’s Neidorff swooped in a year later and dismissed the glaring indicators of Health Net’s misdeeds.
As the point man for Centene, it was expected Neidorff to not leave any stone unturned before deciding on the merger deal. The settlement case should have been a red flag, and so were Health Net’s heavy debts, but Neidorff signed the agreement for unknown reasons.
Shortly after the deal was finalized in 2016, Health Net’s financial problems were exposed, and Centene saw a stunning $1 billion wipeout of its stock’s value. Meanwhile, Neidorff was reportedly $20 million richer in the aftermath of the controversial merger.
