Molina (MOH) to Buy Bright Health's California Medicare Business
Molina Healthcare MOH recently announced its plans to buy Brand New Day and Central Health Plan of California, wholly-owned subsidiaries of Bright Health Company of California, Inc., for $510 million. This strategic buyout, upon materialization, will benefit Molina significantly, bolstering its position in the evolving home health sector post-pandemic.
The acquisition complements Molina's Medicaid footprint and aligns with its 2024 Medi-Cal plan, while also exemplifying the company's successful history of strategic acquisitions.
Expanding Horizons
Molina’s acquisition of Brand New Day and Central Health Plan of California marks a pivotal step in the company's expansion strategy. The purchase price represents 28% of expected 2023 premium revenues, illustrating the significant potential this deal holds.
By acquiring these wholly-owned subsidiaries of Bright Health Company of California, Molina aims to strengthen its position in the home health sector and improve its financial performance. The move aligns perfectly with the company's vision of serving high-acuity, low-income members and further reinforces Molina's commitment to its national growth strategy.
This transaction is expected to add $1.00 per share to new store embedded earnings, bringing the expected total to $5.50 per share.
Boosting Home Health Sector Post Pandemic
The pandemic has brought about transformative changes in the healthcare industry, with the home health sector experiencing notable growth and adaptation. As the world transitions to the post-pandemic era, the demand for accessible and high-quality home-based healthcare services continues to rise. Molina Healthcare's strategic acquisition of the California Medicare business will position the company at the forefront of this evolving sector.
With a well-established presence in 23 counties in California and approximately 125,000 members served, the acquisition enables Molina to accelerate its D-SNP growth initiatives and activate the Los Angeles County 2024 D-SNP option. This strategic move puts Molina in a favorable position to meet the increasing demands for home health services and foster improved patient outcomes.
Leveraging Medicaid Footprint and Medi-Cal Plan
One of the key advantages of this buyout is the synergistic relationship it creates with Molina's Medicaid footprint. Bright Health’s product offerings overlap with 60% of Molina's Medicaid operations, creating opportunities for seamless integration and enhanced efficiency. Moreover, the acquisition complements Molina's expanded 2024 Medi-Cal contract, reinforcing the company's commitment to providing quality healthcare solutions. The consolidation of resources and expertise from both entities is expected to deliver significant benefits to the members served, streamlining access to comprehensive healthcare options and improving overall patient experience.
Molina’s Medi-Cal membership is expected to grow from about 0.6 million members as of Sep 30, 2022, to approximately 1.2 million members in 2024. Molina’s current annual premium revenues related to its Medi-Cal contract of approximately $1.9 billion are now expected to be approximately $3.9 billion in 2024.
Strategic Acquisitions: Catalyst for Success
Throughout its history, Molina Healthcare has demonstrated a successful track record of strategic acquisitions. By acquiring viable assets at attractive valuations, Molina has consistently expanded its operations and improved financial performance. This latest acquisition of Brand New Day and Central Health Plan of California represents yet another textbook execution of Molina's growth playbook. With the proven team of operators at the helm, Molina is well-positioned to capitalize on this strategic buyout and continue its trajectory of meaningful growth in California and beyond.
Zacks Rank and Price Performance
Molina Group carries a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of MOH have lost 9.1% in a year compared with the industry’s decline of 9.7%.
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Stocks to Consider
Some better-ranked stocks in the Medical space are Humana Inc. HUM, The Ensign Group ENSG and HCA Healthcare HCA, each carrying Zacks Rank #2.
Humana’s earnings surpassed the Zacks Consensus Estimate in the last four quarters, with the average surprise being 8.87%. The Zacks Consensus Estimate for HUM’s 2023 and 2024 earnings per share indicates a year-over-year increase of 12% and 13.3%, respectively. Year to date, HUM shares have lost 13.1%.
Ensign Group delivered an average four-quarter earnings surprise of 0.45%. The Zacks Consensus Estimate for ENSG’s 2023 and 2024 earnings per share indicates a year-over-year increase of 13.5% and 8.9%, respectively. Year to date, ENSG shares have lost 1%.
HCA Healthcare delivered an average four-quarter earnings surprise of 9.04%. The Zacks Consensus Estimate for HCA’s 2023 and 2024 earnings per share indicates a year-over-year increase of 7.2% and 8.8%, respectively. Year to date, HCA shares have gained 23.4%.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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