Coventry acquisition boosts Aetna's IT offerings

By Bernie Monegain
10:20 AM

Healthcare insurer Aetna's acquisition of Coventry Health Care not only adds more than 5 million members to Aetna's rolls, but also new opportunities for its health IT businesses.

Hartford, Conn.-based Aetna and Bethesda, Md.-based Coventry announced Aug. 20 they have entered into a definitive agreement for Aetna to acquire Coventry in a transaction valued at $7.3 billion, including the assumption of Coventry debt.

Coventry is a diversified managed healthcare company that offers a full portfolio of risk and fee-based products, including Medicare Advantage and Medicare Part D programs, Medicaid managed care plans, group and individual health insurance, coverage for specialty services such as workers’ compensation, and network rental services. The acquisition is projected to add nearly 4 million medical members and 1.5 million Medicare Part D members to Aetna’s membership.

The deal increases Aetna’s share of revenues from government business to more than 30 percent – up from 23 percent currently.

“This acquisition is in keeping with Aetna’s disciplined approach to deploying capital,” said Aetna officials said in a press release. “Coventry’s diversified business will enhance and balance Aetna’s core commercial and government businesses, while its strong local provider relationships will create additional marketing opportunities for our accountable care Solutions and provider technology businesses.”

Aetna has partnered with several providers to form accountable care organizations. One of the partnerships is with Banner Health Network with headquarters in Phoenix, where the backbone of the integrated system that Aetna is helping to buid is an enhanced electronic medical records system that connects the patients and Banner Health Network physicians and providers into a single record or database in real-time.

The Coventry acquisition is expected to:

  • Add a growing individual Medicare Advantage business and a leading Medicare Part D business, complementing Aetna’s Group Medicare Advantage franchise
  • Substantially increase Aetna’s Medicaid footprint, creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity populations as they move into managed care
  • Improve Aetna’s positioning in consumer-based commercial lines of business, including Middle Markets, Small Group and Individual, and
  • Add a low-cost administrative platform and value-based provider networks.

“Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies,” said Mark T. Bertolini, Aetna’s chairman, president and CEO. “Coventry has distinct capabilities and a local market focus that will accelerate our efforts to bring simpler, more affordable products to consumer insurance exchanges in 2014 and beyond.

“Once the transaction is completed, our larger capital base also will enhance our ability to continue to invest in innovation, technologies and capabilities to lead the transformation of the U.S. health are industry,” he added.
 
“With this transaction, our combined businesses will be positioned to better serve a broader market and develop new partnerships with providers to offer high quality and affordable healthcare. We look forward to working together to build upon the strengths of each company to take advantage of opportunities during this dynamic time for our industry,” said Allen F. Wise, chairman and CEO of Coventry.

“This acquisition is in keeping with Aetna’s disciplined approach to deploying capital," said Joseph M. Zubretsky, Aetna’s senior executive vice president and CFO. "Coventry’s diversified business will enhance and balance Aetna’s core commercial and government businesses, while its strong local provider relationships will create additional marketing opportunities for our accountable care solutions and provider technology businesses.

“The transaction also will create a significant synergy opportunity to further Aetna’s efforts to increase our operating efficiency. We expect synergies from the transaction to be $400 million annually in 2015,” he added. “These cost efficiencies will support our efforts to drive costs out of the system and offer products at a lower price point in the marketplace.”