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About Magellan Health, Inc.

Magellan Health is one of the largest managed behavioral health care companies in the US. 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 about 55 million members through contracts with federal and local government agencies, insurance companies, and employers. Magellan's Pharmacy Management segment's services include benefit management, dispensing, administration, clinical programs, medical pharmacy management, and care coordination.

Operations

Magellan operates through two primary business segments: Healthcare (which brings in over 60% of revenue) and Pharmacy Management (some 40% of revenue).

The Healthcare segment provides managed behavioral 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 its clients 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.

Geographic Reach

Magellan Health operates about 70 offices in 25 states and Washington, DC.

Sales and Marketing

Magellan's customers include health plans, employer groups, government and military agencies, labor unions, third-party administrators, and pharmaceutical manufacturers. It serves more than 55 million members, including some 38 million from commercial entities, some 15 million from pharmacy management entities, and some 1.5 million from government entities. The government accounts for about 60% of total revenue, though.

The company has a network of approximately 220,000 health care providers, as well as a third-party network of facilities including psychiatric and substance abuse hospitals, partial hospitalization facilities, rehab centers, and community health centers.

Financial Performance

Magellan's revenues have been climbing upward over the past five years, but net income has been volatile from year to year.

In 2018 the company's revenue increased 25% to $7.3 billion. In the Healthcare segment, this was largely due to the 2017 acquisition of Senior Whole Health, new contracts secured, and higher membership, but partially offset by unfavorable rate changes and terminated contracts. The Pharmacy Management segment had a 12% decrease in revenue, though, due to factors including decreased formulary management revenue, lower government pharmacy revenue, and decreased medical pharmacy revenue.

Net income fell 78% to $24.2 million that year; it posted a $28 million loss in the fourth quarter. The losses were attributed to $50 million out-of-period and non-recurring items.

The company ended 2018 with $272.3 million in net cash, $127 million less than it had at the end of 2017. Operating activities provided $164.8 million, while investing activities used $128.4 million and financing activities used another $162.8 million.

Strategy

Magellan's growth strategy include maximizing and expanding its key value drivers. This includes a continued focus on specialty drug management (by utilizing analytics, high-touch clinical programs, and comprehensive specialty drug solutions), Medicaid, behavioral health, and specialty health care. It aims to expand its management programs for special populations such as individuals dealing with serious mental illness. The company is also expanding Medicaid management programs for certain high-cost populations including dual-eligibility patients (those qualifying for both Medicare and Medicaid services), forming partnerships and ventures with regional health plans. 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.

Magellan is also working to expand its pharmacy management business. In 2018 it launched MRx Predict, an analytics product that proactively identifies patients at risk of experiencing adverse events and predicts future drug cost drivers for customers.

Other initiatives include driving new sales while retaining existing customers. Its efforts include seeking new employer contracts and upselling to its customers. It is also looking to reduce its cost of care and make operational improvements to improve margins. The last key to its core strategy is to engage its workforce through development opportunities while streamlining its corporate structure.

 

Mergers and Acquisitions

Magellan acquired Senior Whole Health for $400 million in 2017. The formerly privately held Senior Whole Health provides Medicare and Medicaid dual-eligible benefits in the states of Massachusetts and New York. With that purchase, Magellan expanded into Massachusetts' Senior Care Options program, as well as the managed long-term care market in New York City.

Company Background

William Fickling, once a star basketball player at Auburn University, started his career in his father's real estate office in Georgia. In 1969 Fickling founded Charter Medical as a holding company for the family's six nursing homes and one hospital. The company went public in 1971 as an owner/manager of general acute care hospitals. By the mid-1980s it had focused on psychiatric facilities and was adding addiction treatment centers to its portfolio.

The company went into Chapter 11 in 1991, emerging in 1992 with a plan to focus on behavioral health care; it also went public again. As part of its reorganization, Charter in 1995 bought Magellan Health Services and took that name. It also bought 51% of Green Spring Health Services, a managed care company specializing in mental health and substance abuse. (It bought the rest in 1998.)

Magellan Health, Inc.

4800 N Scottsdale Rd STE 4400
Scottsdale, AZ 85251-7680
Phone: 1 (602) 572-6050

Stats

Employer Type: Publicly Owned
Stock Symbol: MGLN
Stock Exchange: , NASDAQ
CTO: Srinivas Koushik
CFO: Jonathan N. Rubin
Chairman and CEO: Barry M. Smith
Employees (This Location): 2,300
Employees (All Locations): 10,500

Major Office Locations

Scottsdale, AZ

Other Locations

Anchorage, AK
Glendale, AZ
Mesa, AZ
Phoenix, AZ
Rancho Cordova, CA
Avon, CT
Miami, FL
Plantation, FL
Macon, GA
Des Moines, IA
Bridgewater, MA
Columbia, MD
Jefferson City, MO
Maryland Heights, MO
Greensboro, NC
Parsippany, NJ
Albany, NY
Astoria, NY
New York, NY
Bethlehem, PA
Langhorne, PA
Newtown, PA
Glen Allen, VA