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. 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. Magellan's Pharmacy Management segment's services include administration, billing, claims handling, technology programs, and coordination of care.
In 2015, Magellan restructured its operations into two segments: Healthcare (63% of revenue that year) and Pharmacy Management (37% of revenue).
The Healthcare segment provides managed health care services and employee assistance program (EAP) services, as well as managing other specialty areas including diagnostic imaging and musculoskeletal health. It also provides the integrated management of physical, behavioral, and pharmaceutical health care for special populations through Magellan Complete Care (MCC).
Magellan's Pharmacy Management segment offers products and services to help manage pharmacy benefit programs. It provides pharmacy benefit management (PBM) services, pharmacy benefit administration (PBA) for Medicaid and other government-sponsored programs, medical pharmacy management, and programs to integrate management of specialty drugs across medical and pharmacy benefits in complex cases.
Magellan's Corporate segment manages sales and marketing, information technology, and other corporate activities.
Magellan operates about 50 offices in 27 states and Washington, DC.
Sales and Marketing
Magellan's customers include health plans and employer groups, as well as government agencies in 27 states and Washington, DC. It also provides services to select pharmaceutical manufacturers. The company has a network of some 165,000 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.
Advertising expenses in 2015 totaled some $2.5 million, down from $2.7 million in 2014 but up from $2.3 million in 2013.
Although revenues took a dip 2011, they have generally been trending upward over the past few years. In 2015 revenues increased 22% to $4.6 billion (versus $3.7 billion in 2014) due to 67% rise in the Pharmacy Management segment plus 6% growth in the Healthcare segment. Pharmacy Management benefited from a number of factors, including the 2015 acquisition of PBM 4D Pharmacy Management Systems, the implementation of a number of new contracts, and net increased activity from existing customers. Healthcare rose on new contracts and increased services provided to existing customers.
Despite the higher revenues, net income has fallen for the past three years. It dropped 60% to $31 million in 2015 as a result of higher operating costs related to new business, program support, and acquisitions.
Cash flow from operations rose 13% to $239 million that year, largely due to contingent considerations of potential future payments related to recent acquisitions.
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. In 2014 it expanded its services to members in Florida, broadening its offerings in Jacksonville, Orlando, Palm Beach, Tallahassee, Tampa Bay, and surrounding communities. 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), 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 2016 the company purchased The Management Group for $15 million. That firm provides home and long-term care services; the deal aligns with Magellan's plans to expand in the long-term services and supports market.
Later that year, Magellan agreed to buy Veridicus Holdings for $74.5 million. Veridicus provides PBM services, medication therapy management, clinical care management, and Medicare Part D services to employers, sponsors, and third-party administrators.
The company acquired 4D Pharmacy Management Systems in 2015 for $55 million. By purchasing that PBM, Magellan gains the potential to enter new markets.
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. It also acquired Cobalt Therapeutics, expanding its computerized cognitive behavioral therapy programs.