Magellan Health has charted its course to become one of the largest managed behavioral health care companies in the nation. The company manages mental health plan, employee assistance, and work/life programs through its nationwide third-party provider network of some 70,000 behavioral health professionals. Magellan also provides radiology benefits management, specialty pharmaceutical management, and Medicaid management. Overall, it serves more than 58 million members through contracts with federal and local government agencies, insurance companies, and employers. Its services include administration, billing, claims handling, technology programs, and coordination of care.

Operations

Magellan's managed health care operations account for about 70% of annual revenues, with services provided to public sector clients accounting for the lion's share (50% of sales). These programs generally provide behavioral health benefits to Medicaid and other state benefit recipients through contracts with state and local authorities. Some of the states with which it has contracts are Arizona, Florida, Iowa, Nebraska, and Pennsylvania.

Managed behavioral health services provided to commercial insurers and employer groups account for 20% of revenues. Services are provided through the company's network of behavioral health professionals, clinics, hospitals, and other care providers; operating channels include risk-based coverage, administrative service only products, and employee assistance programs.

The company's specialty solutions segment provides radiology benefits and other specialty coverage such as ultrasounds, cardiology, and pain management. Subsidiary National Imaging Associates (NIA) manages benefits for diagnostic imaging facilities. Another segment, pharmacy management, provides clinical and financial management of prescriptions, both traditional and state-funded. It also dispenses specialty pharmaceuticals. Magellan Medicaid Administration helps public sector clients run their Medicaid programs.

Magellan's corporate segment manages sales and marketing, information technology, and other corporate activities.

Geographic Reach

Magellan operates about 50 offices in 22 states and Washington, DC.

Sales and Marketing

Magellan's customers include about 40 health plans and employer groups, as well as government agencies in 22 states and Washington, DC. It also provides services to select pharmaceutical manufacturers. The company has a network of some 145,000 health care providers, as well as a third-party network of facilities including psychiatric and substance abuse hospitals, rehab centers, and community health centers.

Magellan serves customers ranging from health plans and managed care organizations to employers, labor unions, public agencies, and third-party administrators.

Financial Performance

Although revenues took a dip 2011, they have generally been trending upward over the past few years. In 2013 revenues increased 11% to $3.6 billion (versus $3.2 billion in 2012) as the managed care, pharmacy management, and specialty solutions all saw growth. Pharmacy management's net revenue increased 23% that year, partly as a result of the October 2013 acquisition of Partners Rx. Other factors leading to overall growth were an increase in customer contracts, expansion of existing membership bases, and rises in rates.

Net income has fluctuated in the last five years; it fell 17% to $125.3 million in 2013 due to higher operating costs (including the cost of new contracts and added memberships as well as restructuring costs of terminated contracts). Cash flow from operations grew $2 million in 2013 to $183 million as cash used in tax contingencies fell, among other factors.

Strategy

While Magellan still works to expand its managed health care business by promoting and adding new services, its primary strategies are to seek growth through the diversification of its business lines and to expand its focus on special populations such as individuals with serious mental illness. It recently announced plans to provide expanded computerized cognitive behavioral therapy programs for those suffering from medical and behavioral issues. Acquisitions and organic measures have allowed the company to enter new business segments including radiology benefits management and specialty pharmaceutical management, both of which are showing rapid growth.

According to the Centers for Medicare and Medicaid Services, Medicaid enrollment is projected to increase rapidly over the next decade, and Magellan intends to take advantage of that increase by marketing itself to states that need guidance navigating the public mental health system.

The company is also expanding Medicaid management programs for special high-cost populations including dual-eligibility patients (those qualifying for both Medicare and Medicaid services), partly forming partnerships and ventures with regional health plans.

Magellan's new integrated health management business, Magellan Complete Care, is active in three states; the company plans to expand the business into other markets.

Mergers and Acquisitions

In 2013 Magellan acquired full-service pharmacy benefit management business Partners Rx, which focuses on serving health plans and self-funded employers, for $100 million. The deal boosted the scale of the company's pharmacy benefit business and has already had a positive impact on revenues.

Also that year, the company bought a 65% stake in New York-based HMO AlphaCare Holdings, adding a managed long-term care plan in five counties and Medicare plans in four counties.

Magellan in 2014 acquired CDMI, a provider of clinical consulting programs for managed care organizations and other clients, for $205 million. The purchase boosted its existing clinical specialty drug and medical management support operations and provides an opportunity to cross-sell its pharmacy benefit management services.

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Magellan Health, Inc.


4800 N Scottsdale Rd #6000
Scottsdale, AZ 85251-7616
Phone: 1 (602) 572-6050
Fax: 1 (860) 507-1990
www.magellanhealth.com

STATS


  • Employer Type: Public
  • Stock Symbol: MGLN
  • Stock Exchange: NASDAQ
  • Chairman and CEO: Barry M. Smith
  • CFO: Jonathan N. Rubin
  • Chairman and CEO: Barry M. Smith

Major Office Locations

  • Scottsdale, AZ

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