Centene Corporation, a healthcare company, reported its quarterly financial results for the period ended September 30, 2024. The company’s revenue increased by 12.1% to $34.4 billion, driven by growth in its Medicaid and Medicare Advantage businesses. Net income rose to $444.8 million, or $0.88 per diluted share, compared to $343.8 million, or $0.67 per diluted share, in the same period last year. The company’s operating cash flow was $1.4 billion, and its free cash flow was $1.1 billion. Centene’s balance sheet remained strong, with cash and investments of $4.3 billion and debt of $12.4 billion. The company’s management discussed its financial performance and outlook, highlighting its focus on growth, cost savings, and strategic acquisitions.
Financial Performance Highlights for Centene Corporation
Centene Corporation, a leading provider of government-sponsored healthcare, has reported its financial results for the third quarter and first nine months of 2024. The company’s performance demonstrates its ability to navigate the evolving healthcare landscape and deliver value to its members, customers, and shareholders.
Overview of Financial Performance
In the third quarter of 2024, Centene’s total revenues increased by 10% to $42.0 billion, compared to $38.0 billion in the same period of 2023. This growth was driven by several factors, including Medicaid rate increases, membership growth in the Marketplace business, and increased premium tax revenue.
Centene’s managed care membership grew by 2% year-over-year, reaching 28.6 million members as of September 30, 2024. This increase was primarily due to the expansion of the company’s Marketplace product, Ambetter Health, which saw a 22% increase in membership.
The company’s health benefits ratio (HBR), which represents medical costs as a percentage of premium revenues, was 89.2% in the third quarter of 2024, compared to 87.0% in the same period of 2023. This increase was driven by higher acuity in the Medicaid population due to the Medicaid redetermination process, as well as the impact of lower Medicare Advantage revenue resulting from the Star quality ratings.
Centene’s selling, general, and administrative (SG&A) expense ratio improved to 8.3% in the third quarter of 2024, compared to 8.7% in the same period of 2023. This was primarily due to the divestiture of the Circle Health business, which had a higher SG&A expense ratio, as well as continued leveraging of expenses over higher revenues.
The company’s diluted earnings per share (EPS) for the third quarter of 2024 was $1.36, compared to $0.87 in the same period of 2023, representing a 56% increase. Adjusted diluted EPS, which excludes certain items, was $1.62 in the third quarter of 2024, compared to $2.00 in the same period of 2023.
Segment Performance
Centene operates in four main segments: Medicaid, Medicare, Commercial, and Other.
Medicaid Segment In the Medicaid segment, total revenues increased by 7% in the third quarter of 2024, compared to the same period in 2023. This was primarily driven by increased premium tax revenue and rate increases, partially offset by lower membership due to the Medicaid redetermination process. Gross margin in the Medicaid segment decreased by 27% due to the lower membership and higher acuity of the remaining members.
Medicare Segment The Medicare segment saw a 4% increase in total revenues in the third quarter of 2024, compared to the same period in 2023. This was mainly due to a 49% increase in Medicare Prescription Drug Plan (PDP) membership, partially offset by a 14% decrease in Medicare Advantage membership. Gross margin in the Medicare segment decreased by 30%, primarily due to the lower Medicare Advantage revenue resulting from the Star quality ratings impact.
Commercial Segment The Commercial segment, which includes the Marketplace business, experienced a 35% increase in total revenues in the third quarter of 2024, compared to the same period in 2023. Gross margin in the Commercial segment increased by 27%, driven by the 22% membership growth in the Marketplace business and improved margin through strong product design and execution.
Other Segment The Other segment, which includes the company’s pharmacy operations, vision and dental services, and international businesses, saw a 15% decrease in total revenues in the third quarter of 2024, compared to the same period in 2023. Gross margin in the Other segment decreased by 58%, primarily due to recent divestitures of the company’s international businesses, Operose Health and Circle Health.
Regulatory Trends and Uncertainties
Centene continues to navigate the evolving healthcare landscape, including changes in government-sponsored programs and regulations. The company is actively engaged with policymakers and regulators to ensure that individuals have access to quality, affordable healthcare.
The Medicaid redetermination process, which began in April 2023, has had a significant impact on the company’s Medicaid membership. Centene has worked closely with its state partners to match rates to the changing acuity of the Medicaid population as the redetermination process unfolds. The company expects that the majority of states will have substantially completed their unwinding processes by the end of 2024, with any remaining reductions being limited to certain populations of members.
In the Medicare segment, Centene’s Star quality ratings decreased in the 2023 rating year, which adversely impacted the company’s 2024 Medicare revenue. The company has recorded a premium deficiency reserve to account for this impact and is working to improve its Star ratings going forward.
Centene continues to advocate for legislation and regulations that support the expansion of Medicaid and the Health Insurance Marketplace, as well as the integration of Medicare and Medicaid services for dually eligible individuals.
Outlook and Future Drivers
Centene’s financial performance and strategic positioning suggest that the company is well-equipped to navigate the evolving healthcare landscape and capitalize on future growth opportunities.
In the Medicaid segment, the company has secured several new contracts and contract renewals, including in Texas, New Hampshire, North Carolina, Oklahoma, Nebraska, and California. These contracts will help to maintain and expand the company’s Medicaid footprint.
In the Medicare segment, Centene is focused on improving its Star quality ratings and expanding its Medicare Advantage and Prescription Drug Plan offerings. The company’s Medicare Advantage membership is expected to decline in 2025 due to the impact of the lower Star ratings, but the company is working to address this issue.
Centene’s Marketplace business, Ambetter Health, continues to be a strong growth driver for the company. The product is now available in 29 states, and the company plans to further expand its geographic footprint in 2025.
The company has also made strategic divestitures, including the sale of its international businesses, Operose Health and Circle Health, as well as the sale of Collaborative Health Systems. These divestitures have allowed Centene to focus on its core government-sponsored healthcare business and improve its financial performance.
Conclusion
Centene Corporation’s financial results for the third quarter and first nine months of 2024 demonstrate the company’s ability to navigate the evolving healthcare landscape and deliver value to its stakeholders. The company’s strong performance in the Marketplace business, coupled with its strategic focus on government-sponsored healthcare programs, positions Centene well for continued success in the future.
Despite the challenges posed by the Medicaid redetermination process and the impact of lower Medicare Advantage Star quality ratings, Centene has shown its resilience and adaptability. The company’s commitment to providing access to quality, affordable healthcare for low-income and complex populations remains a key driver of its success.
As Centene continues to execute on its value creation initiatives and capitalize on growth opportunities, the company is well-positioned to deliver long-term value for its shareholders and contribute to the overall improvement of the healthcare system.