It was revealed on Monday that Centene (NYSE:
) has cuts its earnings guidance for the full year 2012 , thanks
to the fact that the Medicaid insurer seeing high medical costs
in the states of Kentucky and Texas. It is now preparing itself
for an additional potential write-down.
As a result, CNC has lowered its full-year per-share earnings
by $1.19 to between $1.45 and $1.65 per share.
The company said that it expects a loss in the second quarter
but will return to profitability in the third quarter. That might
be mildly optimistic, but at least the company is erring on the
side of positivity.
While the cuts are undeniably bad news, they are necessary as
they reflect negative financial results in May for CNC's Kentucky
Health Plan, as well as its Hidalgo service area in its Texas
Health Plan and its Celtic individual health businesses.
Quite why those particular areas have been so heavily hit is
something of a mystery, although the company shed some light in a
statement on Wednesday when it said that patient usage of
long-term-care services in two Texas regions is far exceeding
usage in other areas. That leaves the company not taking enough
premium revenue to cover costs in the Hidalgo and El Paso
regions, where the company covers roughly 45,000 lives.
CEO Michael Neidorff said of Texas that, "We're working with
the state on it. The state has always proved to be a good
Meanwhile, the company saw an increase in medical costs in
Kentucky, due to the retroactively assigning members, in addition
to a large number of non-inpatient claims during the month of
As if all of that isn't bad enough, the company could well be
hit with a charge of $28 million, not reflected in the revised
guidance, due to a write-down in goodwill and intangible assets
related to the Celtic business.
The company is hosting an investors meeting on Thursday of
this week, and it is expected to provide more details about its
guidance then. Hope fully, it will clear up some of the questions
related to Texas, Kentucky and the Celtic business.
CNC shares closed at $35.47 on Friday. The stock is down 10%
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