AMERIGROUP looks after the health of America's needy. The managed health care provider targets people eligible for Medicaid, the State Children's Health Insurance Program (SCHIP), FamilyCare, and other government special needs plans. Its top Medicaid plans include a product for families receiving temporary assistance to needy families (TANF) benefits and one for aged, blind, or disabled (ABD) persons receiving supplemental income. AMERIGROUP's SCHIP programs cover uninsured kids ineligible for Medicaid. The company contracts with about 135,000 primary care doctors and specialists, as well as 800 hospitals, to serve some 2.7 million members in more than a dozen states. The company is owned by WellPoint.
WellPoint purchased AMERIGROUP in a cash-for-stock transaction worth nearly $4.5 billion in late 2012 to diversify and expand its operations in the Medicaid sector. Following the transaction, WellPoint's state-sponsored health programs serves some 4.5 million customers in 19 states. By combining the two organizations, WellPoint hopes to reduce expenses and improve the quality of Medicaid services; it also hopes to take advantage of federal reform laws that aim to extend state Medicaid coverage. The merger also creates opportunities to provide dual eligibility products (for members that qualify for both Medicare and Medicaid coverage) in over a dozen states, an area where AMERIGROUP was already expanding its services.
To soothe merger antitrust concerns, the company agreed to sell its AMERIGROUP Virginia division, which serves some 55,000 members, to hospital operator Inova.
Overall, AMERIGROUP's strategy has led to steadily increasing revenues over the years, including a 9% rise in 2011 to some $6.3 billion. However, profits are more difficult to maintain in the fluctuating health care marketplace, and in 2011 the firm's net income dropped by 28% over the previous year's results (to about $196 million) due to higher medical cost trends.
Looking towards the future, uncertainty over health reform measures in US and state marketplaces could also impact AMERIGROUP's operations. For instance, changes in how Medicaid services are reimbursed could cause a future revenue drop for the firm; however, proposed changes in enrollment levels for Medicaid programs could also prove profitable for the company.
AMERIGROUP's strategy for growth in recent years consists of expanding its membership through organic measures and through strategic acquisitions. It seeks to enter new contracts in existing markets, such as its largest service territory of Texas, as well as to establish operations in new state markets.
To add new territories through organic measures, the company entered two new states at the beginning of 2012 by establishing winning managed care contracts in both Louisiana and Washington State. Later that year it won a bid to begin operations in Kansas beginning in 2013. In addition, it moved into new counties in the existing markets of Texas and Tennessee in 2010 and 2011 by entering new state and federal contracts. Historically, the company established a presence in Nevada in 2009, New Mexico in 2008, and Tennessee in early 2007.
AMERIGROUP also grows by developing additional products that enhance its operational focus of providing specialized services to federal, state, and local government agencies. For instance, it has introduced Medicare Advantage offerings for seniors and programs that target dual-eligibility individuals (by offering Medicare and Part D drug benefits in addition to Medicaid) and is gradually offering the plans in broader territories. In the face of rising health expenses (and related pressures from health-reform legislation), AMERIGROUP also works to enhance the cost-effectiveness of its programs through quality control programs such as disease management, case management, utilization reporting, and clinical care oversight.
In addition to its growth measures, the company must also focus on maintaining positive relationships with the government agencies it serves, as the loss of a contract could have a negative effect on AMERIGROUP's income levels. It also strives for good provider and member relations to maintain (or increase) its market share in existing territories.
Mergers & Acquisitions
In 2010 the company expanded by purchasing the New Jersey managed care operations of Centene's University Health Plans; the purchase doubled AMERIGROUP's operations in the state by adding some 55,000 members. In a related transaction in 2009, AMERIGROUP sold its operations in South Carolina (9,000 customer contracts) to Centene after it determined that the market was not core to operations.
Once again aiming towards growth in the Northeast, AMERIGROUP set its sights on New York in 2012. The company greatly expanded its AMERIGROUP New York unit through the acquisition of the Health Plus operations of Lutheran HealthCare that year. It paid some $85 million in cash to obtain Health Plus, which added some 320,000 members in the New York State's Medicaid and family health programs, bringing AMERIGROUP New York's member count up to 430,000. Following the transaction, AMERIGROUP New York began operating as HealthPlus Amerigroup. – less
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