Meridian Health, Michigan's largest Medicaid provider, bought for $2.5B
Louis Aguilar
Michigan's largest Medicaid provider, Detroit-based Meridian Health, has entered a deal to be sold for $2.5 billion to a Florida health care firm.
Tampa-based WellCare Health Plans Inc. announced Tuesday it has agreed to buy Meridian Health Plans of Michigan Inc. and Meridian Health Plans of Illinois, Inc. and the MeridianRx pharmacy benefit management company. The deal is expected to close by the end of the year.
The family-owned Meridian has an estimated 508,000 Medicaid members in Michigan and 565,000 Medicaid members in Illinois as of May 1, according to a joint statement released Tuesday. It also serves Indiana and Ohio.
Meridian was founded by a Grosse Pointe physician, David Cotton, M.D., and his wife, Shery, about a decade ago. The firm, based in downtown Detroit, expects to produce over $4.3 billion in total revenue this year.
Dr. Cotton, his wife and three of their sons who are executives with Meridian "do not intend to stay on" once the sale is complete and the companies have integrated, said Ken Burdick, WellCare's CEO, during a Tuesday webcast.
In 2015, Meridian partnered with Dan Gilbert's Bedrock LLC to buy the One Campus Martius building downtown.
No details were provided on any impact the potential deal could have on the company's Detroit workforce. Three years ago, Meridian officials told media outlets the company had more than 700 employees in downtown Detroit but it is unclear how many work there now.
The biggest share of Meridian's business comes from Medicaid, which is the state and federal program that provides health coverage to low-income residents.
Meridian also has 27,000 enrollees in Medicare Advantage plans, which are becoming a major growth area for insurers. Medicare is the federal program that provides health coverage for people 65 and older or those with disabilities.
As a result of the expected sale, WellCare will have the No. 1 Medicaid membership market share in Michigan and Illinois, increasing the number of states where it is the market leader from four to six.
WellCare had 4.3 million Medicaid members as of the first quarter of this year, according to the press release. It reported revenue of $17 billion and income of $373.7 million in 2017.
"WellCare's unwavering commitment to improving the lives of its members makes it an ideal partner," David B. Cotton, CEO of Meridian, said in the statement. "Our similar missions, values and goals, combined with WellCare's dedication to providing an unparalleled member experience, including access to high quality healthcare, were key factors in our decision."
WellCare expects to fund the transaction through a combination of cash on hand, the company's undrawn $1 billion revolving credit facility, new debt of $600 million to $1 billion and new equity of $800 million to $1.2 billion.