Centene Michael Neidorff, Chairman and CEO. Despite recent scandals involving the company, Neidorff says profits are the top priority. (DoD Photo by U.S. Army Sgt. James K. McCann, Wikimedia commons).
Six months after setting aside $1.25 billion to settle fraud claims with Ohio and 21 other states, the CEO of the nation’s largest Medicaid managed-care company has announced his retirement.
Despite the scandal, Ohio continues to contract with the company. And although Centene denies it’s the case, the problems might have played into the CEO’s departure.
Michael Neidorff, 79, has been CEO of St. Louis-based Centene since 1996. On Tuesday, he said he has been in retirement talks since the summer.
“It has been one of the greatest privileges of my life to serve as CEO of Centene,” Neidorff said in a statement. “Nothing has been more important to me than providing the highest quality of care to the most vulnerable populations we serve. I am deeply appreciative of our employees who have worked tirelessly and with an unwavering commitment to serving our members and partners.”
Likely part of the reason for Neidorff’s departure is that Centene has been the target of an activist investor. Politan Capital Management recently purchased a $900 million stake in the $47 billion company and pushed for changes.
Centene has grown dramatically under Neidorff’s leadership. When he started 25 years ago, it operated in three counties. Now it’s the 24th largest corporation in the United States by revenue and provides managed care for patients in Medicaid, Medicare, service members and the incarcerated in scores of states.
Despite the growth, Politan believed that Centene was financially underperforming compared to its peers. In a separate announcement Tuesday, Centene said it had struck a deal with Politan under which Centene will add five new members to its board, which will then select Neidorff’s successor.
Ohio Attorney Dave Yost in March sued the company, accusing it of layering pharmacy middlemen atop one another to hide unlawful profits. The suit didn’t provide a total amount the AG believed Ohio taxpayers had been cheated out of, but it said it found $400,000 in such money in a single week in 2018.
Yost was the only state AG to sue Centene, but the practices that led to the suit were apparently widespread.
Just three months after it was filed, Centene announced that it was settling with Ohio for $88.3 million and with Mississippi for $55 million — and that it was setting aside more than $1 billion more to settle with 20 other states. Last week, Kansas joined Ohio, Mississippi, Arkansas and Illinois in announcing settlements, which so far total $270 million.
In late October, Centene announced that it was getting out of the pharmacy middleman business that was at the heart of the scandal.
In announcing his retirement, Neidorff spoke of “quality of care” and “vulnerable populations.” But in a virtual investor day two days after he announced settlements with Ohio and Mississippi, he talked of something else.
The $25 million-a-year CEO stressed that the company had admitted to no wrongdoing and he shed little light on the corporate practices that necessitated such a whopping payout. Instead, Neidorff said that growing Centene’s profits were his top priorities.
“I would like to reiterate what I hope you will take away from today,” Neidorff said as he concluded his remarks. “First, our absolute priority moving forward is margin expansion to 4% pre-tax and no less than 3.3% adjusted net income on a sustainable basis. Secondly, margin expansion.”
Last week, shareholder Robert Garfield filed suit over the scandal, Modern Healthcare reported. Not only did it cost the company more than $1 billion, it could harm Centene’s ability to secure future contracts, the news organization reported the suit as saying.
Asked in an email if the fraud allegations were a factor in Neidorff’s retirement, a spokeswoman responded, “The answer to your question is: No.”
Despite the company’s alleged deception and its CEO’s lack of contrition, the Ohio Department of Medicaid in August restarted negotiations with the company. In a process that has been marked by questions of possible bias and conflicts of interest, Centene’s Buckeye Community Health Plan was one of six companies to win part of managed-care business worth $22 billion over five years.
GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
SUPPORT NEWS YOU TRUST.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.