Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Cover [Abstract] | |
Entity Central Index Key | 0000019411 |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Mar. 31, 2021 |
Document Transition Report | false |
Entity File Number | 1-6639 |
Entity Registrant Name | MAGELLAN HEALTH, INC. |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 58-1076937 |
Entity Address, Address Line One | 4801 E. Washington Street |
Entity Address, City or Town | Phoenix |
Entity Address, State or Province | AZ |
Entity Address, Postal Zip Code | 85034 |
City Area Code | 800 |
Local Phone Number | 642-1716 |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Listing, Par Value Per Share | $ / shares | $ 0.01 |
Title of 12(b) Security | Common Stock, par value $0.01 per share |
Trading Symbol | MGLN |
Security Exchange Name | NASDAQ |
Entity Common Stock, Shares Outstanding | shares | 26,126,570 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2021 |
Document Fiscal Period Focus | Q1 |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and cash equivalents ($49,227 and $75,458 restricted at December 31, 2020 and March 31, 2021, respectively) | $ 456,309 | $ 1,144,450 |
Accounts receivable, net | 793,504 | 743,502 |
Short-term investments ($88,867 and $74,312 restricted at December 31, 2020 and March 31, 2021, respectively) | 625,600 | 140,847 |
Pharmaceutical inventory | 46,389 | 43,334 |
Other current assets ($43,547 and $51,511 restricted at December 31, 2020 and March 31, 2021, respectively) | 101,462 | 84,264 |
Total Current Assets | 2,023,264 | 2,156,397 |
Property and equipment, net | 142,084 | 136,739 |
Long-term investments ($1,026 and $2,615 restricted at December 31, 2020 and March 31, 2021, respectively) | 4,830 | 2,612 |
Deferred income taxes | 921 | 1,842 |
Other long-term assets | 119,947 | 108,797 |
Goodwill | 873,830 | 873,779 |
Other intangible assets, net | 71,631 | 79,689 |
Total Assets | 3,236,507 | 3,359,855 |
Current Liabilities: | ||
Accounts payable | 149,760 | 137,380 |
Accrued liabilities | 266,217 | 354,906 |
Medical claims payable | 116,580 | 111,851 |
Other medical liabilities | 123,109 | 126,921 |
Current debt, finance lease and deferred financing obligations | 6,543 | 6,521 |
Total Current Liabilities | 662,209 | 737,579 |
Long-term debt, finance lease and deferred financing obligations | 526,682 | 631,855 |
Deferred income taxes | 13,602 | 7,102 |
Tax contingencies | 11,867 | 11,002 |
Deferred credits and other long-term liabilities | 79,276 | 69,283 |
Total Liabilities | 1,293,636 | 1,456,821 |
Redeemable non-controlling interest | 33,303 | 33,062 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value $.01 per share Authorized-10,000 shares at December 31, 2020 and March 31, 2021-Issued and outstanding-none | ||
Common stock, par value $.01 per share: Authorized-100,000 shares at December 31, 2020 and March 31, 2021-Issued and outstanding-55,549 and 25,887 shares at December 31, 2020, respectively, and 55,789 and 26,127 shares at March 31, 2021, respectively | 558 | 555 |
Other Stockholders' Equity: | ||
Additional paid-in capital | 1,488,975 | 1,477,219 |
Retained earnings | 1,884,957 | 1,857,130 |
Accumulated other comprehensive income (loss) | (195) | (205) |
Treasury stock, at cost, 29,662 and 29,662 shares at December 31, 2020 and March 31, 2021, respectively | (1,464,727) | (1,464,727) |
Total Stockholders' Equity | 1,909,568 | 1,869,972 |
Total Liabilities and Stockholders' Equity | $ 3,236,507 | $ 3,359,855 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Restricted cash and cash equivalents | ||
Restricted cash and cash equivalents | $ 75,458 | $ 49,227 |
Restricted investments, short-term and long-term | ||
Short-term restricted investments | 74,312 | 88,867 |
Long term restricted investments | 2,615 | 1,026 |
Other current restricted assets | ||
Other current restricted assets | $ 51,511 | $ 43,547 |
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 10,000 | 10,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 100,000 | 100,000 |
Common stock, issued (in shares) | 55,789 | 55,549 |
Common stock, outstanding (in shares) | 26,127 | 25,887 |
Treasury stock | ||
Treasury stock (in shares) | 29,662 | 29,662 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net revenue: | ||
Net revenue | $ 1,161,649 | $ 1,122,379 |
Costs and expenses: | ||
Cost of care | 379,191 | 349,108 |
Cost of goods sold | 492,370 | 533,241 |
Direct service costs and other operating expenses | 231,021 | 204,241 |
Legal matter settlement | (9,000) | |
Depreciation and amortization | 21,417 | 23,358 |
Interest expense | 6,426 | 8,958 |
Interest and other income | (341) | (1,219) |
Special charges | 1,151 | |
Total costs, expenses and other income | 1,122,235 | 1,117,687 |
Income from continuing operations before income taxes | 39,414 | 4,692 |
Provision for income taxes | 10,905 | 5,762 |
Net (loss) income from continuing operations | 28,509 | (1,070) |
Income (loss) from discontinued operations, net of tax | (682) | 19,320 |
Net income | $ 27,827 | $ 18,250 |
Basic | ||
Continuing operations (in dollars per share) | $ 1.10 | $ (0.04) |
Discontinued operations (in dollars per share) | (0.03) | 0.78 |
Consolidated operations (in dollars per share) | 1.07 | 0.74 |
Net income per common share - diluted: | ||
Continuing operations (in dollars per share) | 1.07 | (0.04) |
Discontinued operations (in dollars per share) | (0.03) | 0.78 |
Consolidated operations (in dollars per share) | $ 1.04 | $ 0.74 |
Other comprehensive income | ||
Unrealized gains (losses) on available-for-sale securities | $ 10 | $ (201) |
Comprehensive income | 27,837 | 18,049 |
Managed care and other | ||
Net revenue: | ||
Net revenue | 626,076 | 553,168 |
PBM | ||
Net revenue: | ||
Net revenue | $ 535,573 | $ 569,211 |
CONSOLIDATED STATEMENTS OF IN_2
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CONSOLIDATED STATEMENTS OF INCOME | ||
Stock compensation expense | $ 7,057 | $ 5,797 |
Net of income tax (benefit) provision | $ (3) | $ 67 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Common Stock In Treasury | Additional Paid in Capital | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Cumulative Effect, Period of Adoption, Adjustment | Total |
Balance at Dec. 31, 2019 | $ 543 | $ (1,464,727) | $ 1,386,616 | $ 1,475,207 | $ 144 | $ 1,397,783 | ||
Balance (in shares) at Dec. 31, 2019 | 54,285,000 | (29,662,000) | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock compensation expense | 6,057 | 6,057 | ||||||
Exercise of stock options | $ 2 | 11,261 | 11,263 | |||||
Exercise of stock options (in shares) | 216,000 | |||||||
Issuance of equity | $ 1 | (1,137) | (1,136) | |||||
Issuance of equity (in shares) | 130,000 | |||||||
Net income | 18,250 | 18,250 | ||||||
Other comprehensive income (loss)-other | (201) | (201) | ||||||
Balance at Mar. 31, 2020 | $ 546 | $ (1,464,727) | 1,402,797 | $ (413) | 1,493,044 | (57) | $ (413) | 1,431,603 |
Balance (in shares) at Mar. 31, 2020 | 54,631,000 | (29,662,000) | ||||||
Balance at Dec. 31, 2020 | $ 555 | $ (1,464,727) | 1,477,219 | 1,857,130 | (205) | $ 1,869,972 | ||
Balance (in shares) at Dec. 31, 2020 | 55,549,000 | (29,662,000) | 25,887,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock compensation expense | 7,057 | $ 7,057 | ||||||
Exercise of stock options | $ 2 | 7,465 | $ 7,467 | |||||
Exercise of stock options (in shares) | 110,000 | 109,381 | ||||||
Issuance of equity | $ 1 | (2,766) | $ (2,765) | |||||
Issuance of equity (in shares) | 130,000 | |||||||
Net income | 27,827 | 27,827 | ||||||
Other comprehensive income (loss)-other | 10 | 10 | ||||||
Balance at Mar. 31, 2021 | $ 558 | $ (1,464,727) | $ 1,488,975 | $ 1,884,957 | $ (195) | $ 1,909,568 | ||
Balance (in shares) at Mar. 31, 2021 | 55,789,000 | (29,662,000) | 26,127,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net income | $ 27,827 | $ 18,250 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 21,417 | 28,684 |
Special charges | 1,151 | |
Non-cash interest expense | 355 | 585 |
Non-cash stock compensation expense | 7,057 | 6,057 |
Non-cash income tax provision | 7,603 | 7,802 |
Non-cash accretion on investments | 592 | 325 |
Changes in assets and liabilities, net of effects from acquisitions of businesses: | ||
Accounts receivable, net | (50,013) | (33,291) |
Pharmaceutical inventory | (3,055) | 2,629 |
Other assets | (27,283) | (41,862) |
Accounts payable and accrued liabilities | (76,183) | 52,746 |
Medical claims payable and other medical liabilities | 917 | (13,622) |
Tax contingencies | 680 | 925 |
Deferred credits and other long-term liabilities | 9,993 | 3,003 |
Other | 1,067 | (505) |
Net cash provided by (used in) operating activities | (77,875) | 31,726 |
Net cash provided by operating activities from discontinued operations | 35,805 | |
Net cash provided by operating activities from continuing operations | (77,875) | (4,079) |
Cash flows from investing activities: | ||
Capital expenditures | (19,540) | (15,719) |
Acquisitions and investments in businesses, net of cash acquired | (2,372) | (369) |
Purchases of investments | (673,169) | (164,311) |
Proceeds from maturities and sales of investments | 185,619 | 152,394 |
Net cash provided by investing activities | (509,462) | (28,005) |
Net cash provided by investing activities from discontinued operations | (19,154) | |
Net cash provided by investing activities from continuing operations | (509,462) | (8,851) |
Cash flows from financing activities: | ||
Proceeds from borrowings on revolving line of credit | 80,000 | |
Proceeds from exercise of stock options | 7,467 | 10,903 |
Payments on debt, finance lease and deferred financing obligations | (105,506) | (34,774) |
Other | (2,765) | (1,136) |
Net cash provided by (used in) financing activities | (100,804) | 54,993 |
Net cash provided by (used in) financing activities from continuing operations | (100,804) | 54,993 |
Net increase (decrease) in cash and cash equivalents from continuing operations | (688,141) | 42,063 |
Cash and cash equivalents at beginning of period | 1,144,450 | 115,752 |
Cash and cash equivalents at end of period | $ 456,309 | 157,815 |
Non-cash investing activities: | ||
Assets acquired under finance leases and deferred financing obligations | $ 3,599 |
General
General | 3 Months Ended |
Mar. 31, 2021 | |
General | |
General | NOTE A—General Basis of Presentation The accompanying unaudited consolidated financial statements of Magellan Health, Inc., a Delaware corporation (“Magellan”), include Magellan and its subsidiaries (together with Magellan, the “Company”). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the Securities and Exchange Commission’s (the “SEC”) instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated in consolidation. On December 31, 2020, Magellan completed the sale of its Magellan Complete Care business (the “MCC Business”) to Molina Healthcare, Inc. (“Molina”), pursuant to a Stock and Asset Purchase Agreement, dated as of April 30, 2020, by and between the Company and Molina, for cash in the amount of $850 million plus closing adjustments of $158 million (subject to post-closing adjustments, if any), and the assumption by Molina of liabilities of the MCC Business (the “MCC Sale”). The MCC Business was the Company’s business of contracting with state Medicaid agencies and the U.S. Centers for Medicare and Medicaid Services to manage total medical benefits or long-term support services for Medicaid and dual eligible Medicaid and Medicare populations. On January 4, 2021, the Company and Centene Corporation (“Centene”) entered into an Agreement of Plan of Merger (the “Merger Agreement”) by and among the Company, Centene, and Mayflower Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Centene (“Merger Sub”), pursuant to which, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company, with the Company surviving such merger (the “Merger”) as a wholly-owned subsidiary of Centene. Pursuant to the Merger Agreement, each issued and outstanding share of the Company’s common stock will be automatically canceled and converted into the right to receive $95.00 in cash. The Company expects to complete the transaction in the second half of 2021. The Merger has been approved by the Company’s board of directors, the Company’s stockholders and Centene’s board of directors. The completion of the Merger is subject to customary closing conditions, including, among others, the receipt of various regulatory approvals. For additional information on the Merger Agreement and the Merger, please refer to the Company’s Current Reports on Forms 8-K, filed with the SEC on January 4, 2021 and March 31, 2021, and our The Company cannot guarantee that the Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2021. Business Overview The Company provides managed care and pharmacy solutions for some of the most complex areas of healthcare. The Company offers innovative solutions that combine analytics, technology and clinical rigor to drive better decision making, positively impact members’ health outcomes and optimize the cost of care for the customers Magellan serves. The Company provides services to health plans and other managed care organizations (“MCOs”), employers, labor unions, various military and governmental agencies and third-party administrators (“TPAs”). Magellan operates three segments: Healthcare, Pharmacy Management and Corporate. Healthcare Segment The Healthcare Segment (“Healthcare”) customers include health plans, accountable care organizations (“ACOs”), employers, the United States military and various federal government agencies for whom Magellan provides carve-out management services for (i) behavioral health, (ii) employee assistance plans (“EAP”) and (iii) other areas of specialty healthcare including diagnostic imaging, musculoskeletal management, cardiac and physical medicine. These management services can be applied broadly across commercial, Medicaid and Medicare populations, or on a more targeted basis for our health plans and ACO customers. The Behavioral & Specialty Health reporting unit also includes Magellan’s carve-out behavioral health contracts with various state Medicaid agencies, as well as certain provider assets that deliver primary care and behavioral healthcare services through an integrated approach. Magellan’s coordination and management of these healthcare services are provided through its comprehensive network of medical and behavioral health professionals, clinics, hospitals, skilled nursing facilities, home care agencies and ancillary service providers. This network of credentialed providers is integrated with clinical and quality improvement programs to improve access to care and enhance the healthcare experience for individuals in need of care, while at the same time making the cost of these services more affordable for our customers. In addition to the Company’s provider assets where it provides treatment services in certain geographies, the Company also employs licensed behavioral health counselors to deliver non-medical counseling under certain government contracts. The Company provides its Healthcare management services primarily through: (i) risk-based contractual arrangements, where the Company assumes all or a substantial portion of the responsibility for the cost of providing treatment services in exchange for a fixed per member per month (“PMPM”) fee, or (ii) administrative services only (“ASO”) contractual arrangements, where the Company provides services such as utilization review, claims administration and/or provider network management, but does not assume full responsibility for the cost of the treatment services, in exchange for an administrative fee and, in some instances, a gain share. Pharmacy Management Segment The Pharmacy Management segment (“Pharmacy Management”) is comprised of services that provide clinical and financial management of pharmaceuticals paid under both the medical and the pharmacy benefit. Pharmacy Management’s customer solutions include: (i) pharmacy benefit management (“PBM”) services, including pharmaceutical dispensing operations; (ii) pharmacy benefit administration (“PBA”) for state Medicaid and other government sponsored programs; (iii) clinical and formulary management programs; (iv) medical pharmacy management programs; and (v) programs for the integrated management of specialty drugs across both the medical and pharmacy benefit that treat complex conditions, regardless of site of service, method of delivery, or benefit reimbursement. These services are available individually, in combination, or in a fully integrated manner. The Company markets its pharmacy management services to managed care organizations, employers, third party administrators, state governments, and other government agencies, exchanges, brokers and consultants. In addition, the Company will continue to upsell its pharmacy services to its existing customers and market its pharmacy solutions to the Healthcare customer base, including through integrated Pharmacy Management and Healthcare service offerings. Pharmacy Management contracts with its customers for services using risk-based, gain share or ASO arrangements. In addition, Pharmacy Management provides services for most of the MCC business. On May 11, 2020, the Company announced its decision to exit the Medicare Part D business at the end of 2020. Any activity related to Medicare Part D business reflected in the three months ended March 31, 2021 is related to final run-out of the 2020 Part D contract provision. The Company continues to retain its Medicare Employer Group Waiver Plan as well as full capabilities to serve the PBM needs of its existing and prospective Medicare customers. Corporate This segment of the Company is comprised primarily of amounts not allocated to the Healthcare and Pharmacy Management segments that are largely associated with costs related to being a publicly traded company. Summary of Significant Accounting Policies Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in the first quarter of 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company can include, among other things, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, stock compensation assumptions, tax contingencies and legal liabilities. In addition, the Company also makes estimates in relation to revenue recognition under Accounting Standard Codification 606 (“ASC 606”) which are explained in more detail in “ Revenue Recognition Revenue Recognition Virtually all of the Company’s revenues are derived from business in North America. The following tables disaggregate our revenue for the three months ended March 31, 2020 and 2021 by major service line, type of customer and timing of revenue recognition (in thousands): Three Months Ended March 31, 2020 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 349,845 $ — $ (90) $ 349,755 EAP risk-based 79,938 — — 79,938 ASO 59,123 11,534 (83) 70,574 PBM, including dispensing — 518,112 (4,567) 513,545 Medicare Part D — 55,666 — 55,666 PBA — 30,129 — 30,129 Formulary management — 22,161 — 22,161 Other — 611 — 611 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Type of Customer Government $ 227,102 $ 203,957 $ — $ 431,059 Non-government 261,804 434,256 (4,740) 691,320 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Timing of Revenue Recognition Transferred at a point in time $ — $ 573,778 $ (4,567) $ 569,211 Transferred over time 488,906 64,435 (173) 553,168 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Three Months Ended March 31, 2021 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 373,442 $ — $ (86) $ 373,356 EAP risk-based 88,120 — — 88,120 ASO 71,448 11,817 (75) 83,190 PBM, including dispensing — 538,796 (3,399) 535,397 Medicare Part D — 176 — 176 PBA — 49,882 — 49,882 Formulary management — 29,183 — 29,183 Other — 2,345 — 2,345 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Type of Customer Government $ 256,292 $ 156,038 $ — $ 412,330 Non-government 276,718 476,161 (3,560) 749,319 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Timing of Revenue Recognition Transferred at a point in time $ — $ 538,972 $ (3,399) $ 535,573 Transferred over time 533,010 93,227 (161) 626,076 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Per Member Per Month (“PMPM”) Revenue. Pharmacy Benefit Management Revenue. The Company’s customers for PBM business, including pharmaceutical dispensing operations, are generally comprised of MCOs, employer groups and health plans. PBM relationships generally have an expected term of one year or longer. A master services arrangement (“MSA”) is executed by the Company and the customer, which outlines the terms and conditions of the PBM services to be provided. When a member in the customer’s organization submits a prescription, a claim is created which is presented for approval. The acceptance of each individual claim creates enforceable rights and obligations for each party and represents a separate contract. For each individual claim, the performance obligations are limited to the processing and adjudication of the claim, or dispensing of the products purchased. Generally, the transaction price for PBM services is explicitly listed in each contract and does not represent variable consideration. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co-payments and any associated administrative fees, when claims are adjudicated or the drugs are shipped. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co-payments) as it is acting as the principal in the arrangement, controls the underlying service, and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collecting payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client’s members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. For dispensing, at the time of shipment, the earnings process is complete; the obligation of the Company’s customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Pharmacy Benefit Administration Revenue. 2 Formulary Management Revenue. The Company administers formulary management programs for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Formulary management contracts generally have a term of one year or longer. All formulary management contracts have a single performance obligation that constitutes a series for the provision of rebate services for a drug, with utilization measured and settled on a quarterly basis, for the duration of the arrangement. The Company retains its administrative fee and/or a percentage of rebates that is included in its contract with the client from collecting the rebate from the manufacturer. While the administrative fee and/or the percentage of rebates retained is fixed, there is an unknown quantity of pharmaceutical purchases (utilization) during each quarter; therefore the transaction price itself is variable. The Company uses the expected value methodology to estimate the total rebates earned each quarter based on estimated volumes of pharmaceutical purchases by the Company’s clients during the quarter, as well as historical and/or anticipated retained rebate percentages. The Company does not record as rebate revenue any rebates that are passed through to its clients. In relation to the Company’s PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers is recorded as a reduction of cost of goods sold. Government EAP Risk-Based Revenue. The Company has certain contracts with federal customers for the provision of various managed care services, which are classified as EAP risk-based business. These contracts are generally multi-year arrangements. The Company’s federal contracts are reimbursed on either a fixed fee basis or a cost reimbursement basis. The performance obligation on a fixed fee contract is to stand ready to provide the staffing required for the contracted period. For fixed fee contracts, the Company believes the invoiced amount corresponds directly with the value to the customer of the Company’s performance completed to date; therefore, the Company is utilizing the “right to invoice” practical expedient, with revenue recognition in the amount for which the Company has the right to invoice. The performance obligation on a cost reimbursement contract is to stand ready to provide the activity or services purchased by the customer, such as the operation of a counseling services group or call center. The performance obligation represents a series for the duration of the arrangement. The reimbursement rate is fixed per the contract; however, the level of activity (e.g., number of hours, number of counselors or number of units) is variable. A majority of the Company’s cost reimbursement transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series (e.g. day or month) and is recognized as revenue when the portion of the series for which it relates has been provided (i.e. as the Company provides hours, counselors or units of service). In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the contracts in the Company’s PBM business, these reporting requirements are not applicable. The majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. For the Company’s contracts that pertain to these exemptions: (i) the remaining performance obligations primarily relate to the provision of managed healthcare services to the customers’ membership; (ii) the estimated remaining duration of these performance obligations ranges from the remainder of the current calendar year to three years; and (iii) variable consideration for these contracts primarily includes net PMPM fees associated with unspecified membership that fluctuates throughout the contract. Accounts Receivable, Contract Assets and Contract Liabilities Accounts receivable, contract assets and contract liabilities consisted of the following (in thousands, except percentages): December 31, March 31, 2020 2021 $ Change % Change Accounts receivable $ 799,803 $ 824,067 $ 24,264 3.0% Contract assets 3,566 4,678 1,112 31.2% Contract liabilities - current 6,772 6,968 196 2.9% Contract liabilities - long-term 11,073 11,453 380 3.4% Accounts receivable, which are included in accounts receivable, other current assets and other long-term assets on the consolidated balance sheets, increased by $24.3 million, mainly due to timing of receipts. Contract assets, which are included in other current assets on the consolidated balance sheets, increased by $1.1 million, mainly due to the timing of accrual of certain performance incentives. Contract liabilities – current, which are included in accrued liabilities on the consolidated balance sheets, increased by $0.2 million, mainly due to certain revenue payments received in advance. Contract liabilities – long-term, which are included in deferred credits and other long-term liabilities on the consolidated balance sheets, increased by $0.4 million mainly due to payments received for which recognition will be long term partially offset by certain balances which became current. During the three months ended March 31 2021, the Company recognized revenue of $2.0 million that was included in current contract liabilities at December 31, 2020. The estimated timing of recognition of amounts included in contract liabilities at March 31, 2021 are as follows: 202 1—$6.0 million; 2022 —$4.0 million; 2023 —$3.6 million; 2024 and beyond —$4.8 million. During the three months ended March 31, 2021, the revenue the Company recognized related to performance obligations that were satisfied, or partially satisfied, in previous periods was not material. The Company’s accounts receivable consists of amounts due from customers throughout the United States. Collateral is generally not required. A majority of the Company’s contracts have payment terms in the month of service, or within a few months thereafter. The timing of payments from customers from time to time generates contract assets or contract liabilities; however, these amounts are immaterial. The Company’s accounts receivable is net of an allowance for credit losses. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management elected to disaggregate trade receivables into business segments due to risk characteristics unique to each platform given the individual lines of business and market. Pooling was further disaggregated based on either geography or product type. The Company leveraged historical write offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts through the use of an adjustment for current and projected macroeconomic factors. Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses, giving consideration to the location and risks associated with the Company’s customers. Significant Customers Customers exceeding ten percent of the consolidated Company’s net revenues Customers exceeding ten percent of segment net revenues The following customers generated in excess of ten percent of net revenues from continuing operations for the respective segment for the three months ended March 31, 2020 and 2021 (in thousands): Segment Term Date 2020 2021 Healthcare Customer A December 31, 2021 $ 88,539 $ 92,982 Customer B December 31, 2022 49,438 55,486 Pharmacy Management Customer C March 31, 2024 98,617 88,651 Concentration of Business The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the “Pennsylvania Counties”) which are part of the Pennsylvania Medicaid program, with members under its contract with Centers for Medicare and Medicaid Services (“CMS”) and with various agencies and departments of the United States federal government. Net revenues from the Pennsylvania Counties in the aggregate totaled $137.0 million and $152.7 million for the three months ended March 31, 2020 and 2021, respectively. Net revenues from members in relation to its contracts with CMS in aggregate totaled $55.7 million and $0.2 million for the three months ended March 31, 2020 and 2021, respectively. As of December 31, 2020 and March 31, 2021, the Company had $69.6 million and $55.2 million, respectively, in net receivables associated with Medicare Part D from CMS and other parties related to this business. In May 2020, the Company announced its decision to exit the Part D business at the end of 2020. Net revenues from contracts with various agencies and departments of the United States federal government in aggregate totaled $69.9 million and $77.7 million for the three months ended March 31, 2020 and 2021, respectively. The Company’s contracts with customers typically have stated terms of one one Leases The Company leases certain office space, distribution centers, land and equipment. We assess each contract to determine if it contains a lease. This assessment is based on (i) the right to control the use of an identified asset; (ii) the right to obtain substantially all of the economic benefits from the use of the identified asset; and (iii) the right to use the identified asset. The Company elected the short-term lease practical expedient; thus, leases with an initial term of twelve months or less are not capitalized and the expense is recognized on a straight-line basis. Most leases include one or more options to renew, with renewal terms that can extend the lease from one Operating leases are included in other long-term assets, accrued liabilities and deferred credits and other long-term liabilities in the consolidated balance sheets. Finance leases are included in property and equipment, current debt, finance lease deferred financing obligations and long-term debt, finance lease and deferred financing obligations in the consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments per the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. As the rate implicit in most of our leases is not readily determinable, the Company used its incremental borrowing rate to determine the present value of lease payments. The following table shows the components of lease expenses for the three months ended March 31, 2021 (in thousands): Three Months Ended March 31, 2021 Operating lease cost $ 2,408 Finance lease cost: Amortization of right-of-use asset 707 Interest on lease liabilities 166 Total finance lease cost 873 Short-term lease cost 40 Variable lease cost 224 Total lease cost 3,545 Sublease income (7) Net lease cost $ 3,538 The following table shows the components of the lease assets and liabilities as of March 31, 2021 (in thousands): March 31, 2021 Operating leases: Other long-term assets $ 32,053 Accrued liabilities $ 10,597 Deferred credits and other long-term liabilities 33,626 Total operating lease liabilities $ 44,223 Finance leases: Property and equipment, net $ 12,183 Current debt, finance lease and deferred financing obligations $ 4,455 Long-term debt, finance lease and deferred financing obligations 10,783 Total finance lease liabilities $ 15,238 The maturity dates of the Company’s leases as of March 31, 2021 are summarized below (in thousands): March 31, 2021 2021 $ 11,819 2022 14,893 2023 12,399 2024 10,616 2025 5,358 2026 and beyond 5,556 Total lease payments 60,641 Less interest (1,180) Present value of lease liabilities $ 59,461 The following table shows the weighted average remaining lease term and discount rate as of March 31, 2021: March 31, 2021 Weighted average remaining lease term years Operating leases 4.98 Finance leases 3.52 Weighted average discount rate Operating leases 3.18% Finance leases 4.40% Year ended March 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,661 Operating cash flows from finance leases 1,121 Financing cash flows from finance leases 166 Right-of-use asset obtained in exchange for new lease obligation Operating leases — Finance leases — Fair Value Measurements The Company has certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3—Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company’s data. In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2020 and March 31, 2021 (in thousands): December 31, 2020 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 679,554 $ — $ 679,554 Investments: U.S. Government and agency securities 42,399 — — 42,399 Corporate debt securities — 99,749 — 99,749 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 42,399 $ 780,614 $ — $ 823,013 March 31, 2021 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (2) $ — $ 447,627 $ — $ 447,627 Investments: U.S. Government and agency securities 332,403 — — 332,403 Corporate debt securities — 296,716 — 296,716 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 332,403 $ 745,654 $ — $ 1,078,057 (1) Excludes $464.9 million of cash held in bank accounts by the Company. (2) Excludes $8.7 million of cash held in bank accounts by the Company. For the three months ended March 31, 2021, the Company has not transferred any assets between fair value measurement levels. The carrying values of financial instruments, including accounts receivable and accounts payable, approximate their fair values due to their short-term maturities. The fair value of the Notes (as defined below) of $387.4 million as of March 31, 2021 was determined based on quoted market prices and would be classified within Level 1 of the fair value hierarchy. The estimated fair value of the Company’s term loan of $158.8 million as of March 31, 2021 was based on current interest rates for similar types of borrowings and is in Level 2 of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the bal |
Net Income per Common Share Att
Net Income per Common Share Attributable to Magellan Health, Inc. | 3 Months Ended |
Mar. 31, 2021 | |
Net Income per Common Share Attributable to Magellan Health, Inc. | |
Net Income per Common Share Attributable to Magellan Health, Inc. | NOTE B—Net Income per Common Share Attributable to Magellan Health, Inc. The following table reconciles income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data) for the three months ended March 31: Three Months Ended March 31, 2020 2021 Numerator: Net (loss) income from continuing operations $ (1,070) $ 28,509 Income (loss) from discontinued operations, net of tax 19,320 (682) Net income $ 18,250 $ 27,827 Denominator: Weighted average number of common shares outstanding—basic 24,728 25,948 Common stock equivalents—stock options 61 186 Common stock equivalents—RSAs 21 19 Common stock equivalents—RSUs 50 196 Common stock equivalents—PSUs — 201 Common stock equivalents—employee stock purchase plan 9 3 Weighted average number of common shares outstanding—diluted 24,869 26,553 Net (loss) income per common share—basic: Continuing operations $ (0.04) $ 1.10 Discontinued operations 0.78 (0.03) Consolidated operations $ 0.74 $ 1.07 Net (loss) income per common share—diluted: Continuing operations $ (0.04) $ 1.07 Discontinued operations 0.78 (0.03) Consolidated operations $ 0.74 $ 1.04 The weighted average number of common shares outstanding for the three months ended March 31, 2020 and 2021 were calculated using outstanding shares of the Company’s common stock. Common stock equivalents included in the calculation of diluted weighted average common shares outstanding for the three months ended March 31, 2020 and 2021 represent stock options to purchase shares of the Company’s common stock, RSAs, RSUs, PSUs and stock purchased under the Employee Stock Purchase Plan. The Company had additional potential dilutive securities outstanding representing 1.4 million and 0.3 million options for the three months ended March 31, 2020 and 2021, respectively, that were not included in the computation of dilutive securities because they were anti-dilutive for the period. Had these shares not been anti-dilutive, all of these shares would not have been included in the net income attributable to common shareholder per common share calculation as the Company uses the treasury stock method of calculating diluted shares. |
Business Segment Information
Business Segment Information | 3 Months Ended |
Mar. 31, 2021 | |
Business Segment Information | |
Business Segment Information | NOTE C—Business Segment Information The accounting policies of the Company’s segments are the same as those described in Note A—“General.” The Company evaluates performance of its segments based on profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest and other income, changes in the fair value of contingent consideration recorded in relation to acquisitions, gain on sale of assets, special charges or benefits, and income taxes (“Segment Profit”). Management uses Segment Profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk assessment and employee compensation, among other matters. Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. As such, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company’s segments are defined in Note A—“General.” The following tables summarize, for the periods indicated, operating results by business segment (in thousands): Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2020 Managed care and other revenue $ 488,906 $ 64,435 $ (173) $ 553,168 PBM revenue — 573,778 (4,567) 569,211 Cost of care (349,108) — — (349,108) Cost of goods sold — (537,574) 4,333 (533,241) Direct service costs and other (105,936) (81,866) (16,439) (204,241) Stock compensation expense (1) 1,761 2,107 1,929 5,797 Segment Profit (Loss) $ 35,623 $ 20,880 $ (14,917) $ 41,586 Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2021 Managed care and other revenue $ 533,010 $ 93,227 $ (161) $ 626,076 PBM revenue — 538,972 (3,399) 535,573 Cost of care (379,191) — — (379,191) Cost of goods sold — (495,593) 3,223 (492,370) Direct service costs and other (114,993) (104,596) (11,432) (231,021) Legal matter settlement — 9,000 — 9,000 Stock compensation expense (1) 2,519 2,696 1,842 7,057 Segment Profit (Loss) $ 41,345 $ 43,706 $ (9,927) $ 75,124 (1) Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to acquisitions and impairment of intangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit. The following table reconciles income from continuing operations before income taxes to Segment Profit from continuing operations (in thousands): Three Months Ended March 31, 2020 2021 Income from continuing operations before income taxes $ 4,692 $ 39,414 Stock compensation expense 5,797 7,057 Depreciation and amortization 23,358 21,417 Interest expense 8,958 6,426 Interest and other income (1,219) (341) Special charges — 1,151 Segment Profit from continuing operations $ 41,586 $ 75,124 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | NOTE D—Commitments and Contingencies Legal The Company’s operating activities entail significant risks of liability. From time to time, the Company is subject to various actions and claims arising from the acts or omissions of its employees, network providers or other parties. In the normal course of business, the Company receives reports relating to deaths and other serious incidents involving patients for whom the Company provides managed care services. Such incidents occasionally give rise to malpractice, professional negligence and other related actions and claims against the Company or its network providers. Many of these actions and claims received by the Company seek substantial damages and, therefore, require the Company to incur significant fees and costs related to their defense. The Company is also subject to or party to certain class actions and other litigation and claims relating to its operations or business practices including employment practices, and privacy and data protection. The Company maintains a program of insurance coverage against a broad range of risks in the Company’s business, including certain of the class actions and other litigation and claims asserted against the Company, subject to deductibles and self-insured retentions as is described more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021. The Company has recorded reserves that, in the opinion of management, are adequate to cover litigation, claims or assessments that have been or may be asserted against the Company, and for which the outcome is probable and reasonably estimable. Management believes that the resolution of such litigation and claims will not have a material adverse effect on the Company’s financial condition or results of operations; however, there can be no assurance in this regard. Regulatory Issues The managed healthcare industry is subject to numerous laws and regulations. The subjects of such laws and regulations cover, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirements, information privacy and security, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Over the past several years, government activity has increased with respect to investigations and/or allegations concerning possible violations of fraud and abuse and false claims statutes and/or regulations by healthcare organizations and insurers. Entities that are found to have violated these laws and regulations may be excluded from participating in government healthcare programs, subjected to fines or penalties or required to repay amounts received from the government for previously billed patient services. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time. The Company is subject to various federal, state and other laws and rules regarding the use, storage, protection and disclosure of confidential member and protected personal or health information, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) and other applicable laws. The Company has experienced data security incidents resulting in disclosure of confidential or protected personal or health information. We have notified government agencies as appropriate and are cooperating with investigations and requests for information. Noncompliance with any applicable privacy or data security laws and regulations could result in enforcement actions, fines, penalties, and reputational and financial harm to the Company. In addition, regulators of certain of the Company’s subsidiaries may exercise certain discretionary rights under regulations including increasing their supervision of such entities, requiring additional restricted cash or other security or seizing or otherwise taking control of the assets and operations of such subsidiaries. The Company is subject to certain federal laws and regulations in connection with its contracts with the federal government. These laws and regulations affect how the Company conducts business with its federal agency customers and may impose added costs on its business. The Company’s failure to comply with federal procurement laws and regulations could cause it to lose business, incur additional costs and subject it to a variety of civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, harm to reputation, suspension of payments, fines, and suspension or debarment from doing business with federal government agencies. The Company’s wholly owned subsidiary, Armed Forces Services Corporation (“AFSC”), conducts business with federal agency customers and federal contractors to such agencies. The Company investigated, with the assistance of outside counsel, matters relating to compliance by AFSC with Small Business Administration ( “SBA”) regulations and other federal laws applicable to government contractors and reported findings to the SBA and the Department of Defense, including facts indicating violations of SBA regulations and other federal laws, such as the Anti-Kickback Act, by former AFSC executives, none of which was disclosed to Magellan prior to its acquisition of AFSC. The Company voluntarily responded to government requests for further information regarding the Company’s investigation. As a result of the Company's disclosure and the ensuing government investigation, a former AFSC executive pleaded guilty in the United States District Court for the Eastern District of Virginia to one count of honest services fraud, and at sentencing in September 2020, the Court ordered the former AFSC executive to pay restitution to AFSC as the victim of that offense. In June 2020, the United States Attorney’s Office for the Eastern District of Virginia (“U.S. Attorney’s Office”) informed the Company of a civil investigation regarding the Company and AFSC related to potential violations of the False Claims Act and/or the Anti-Kickback Act also stemming from the matters self-disclosed by the Company. While the Company believes that it has responded appropriately by self-reporting findings regarding matters that incepted prior to its acquisition of AFSC in order to mitigate the risk of adverse consequences, should the Company or AFSC be held responsible for the reported conduct in a proceeding initiated by the U.S. Attorney’s Office, SBA, Department of Defense and/or other federal agencies, we may be required to pay damages and/or penalties and AFSC could be suspended or debarred from government contracting. Management believes that the resolution of such investigations will not have a material adverse effect on the Company’s financial condition or results of operations; however, there can be no assurance in this regard. AFSC generated approximately 2.4% of the Company’s total revenue from continuing operations for the year ended December 31, 2020 and three months ended March 31, 2021. Stock Repurchases The Company’s board of directors has previously authorized a series of stock repurchase plans. Stock repurchases for each such plan could be executed through open market repurchases, privately negotiated transactions, accelerated share repurchases or other means. The board of directors authorized management to execute stock repurchase transactions from time to time and in such amounts and via such methods as management deemed appropriate. Each stock repurchase program could be limited or terminated at any time without prior notice. Pursuant to the terms of the Merger Agreement, the Company suspended its stock repurchase programs on January 4, 2021, the date we announced our planned merger with Centene. The Company’s board of directors approved, and subsequently amended, a stock repurchase plan which authorizes the Company to purchase up to $400 million of its outstanding common stock through November 15, 2021 (the “Repurchase Program”). As of March 31, 2021, the remaining capacity under the Repurchase Program was $186.3 million. Stock repurchases under the programs may be carried out from time to time in open market transactions (including blocks) or in privately negotiated transactions. The timing of repurchases and the actual amount purchased will depend on a variety of factors including the market price of the Company’s shares, general market and economic conditions, and other corporate considerations. Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow the Company to purchase its shares during periods when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Repurchases are expected to be funded from working capital and anticipated cash from operations. The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by the Company’s board of directors at any time. Pursuant to the Stock Repurchase Program, the Company made purchases as follows (aggregate cost excludes broker commissions and is reflected in millions): Total Number Average of Shares Price Paid Aggregate Period Purchased per Share Cost October 26, 2015 - December 31, 2015 345,044 $ 53.46 $ 18.4 January 1, 2016 - December 31, 2016 1,828,183 58.40 106.8 January 1, 2017 - December 31, 2017 280,140 77.67 21.8 January 1, 2018 - December 31, 2018 844,872 74.59 63.0 January 1, 2019 - December 31, 2019 60,901 61.15 3.7 January 1, 2020 - December 31, 2020 — — — January 1, 2021 - March 31, 2021 — — — 3,359,140 $ 213.7 The Company made no share repurchases from April 1, 2021 through April 23, 2021. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2021 | |
Acquisitions | |
Acquisitions | Acquisition of Aurelia Health, LLC percent of the outstanding membership interests of Aurelia Health, LLC and its subsidiary Michael B. Bayless, LLC (collectively “Bayless”) (the “Bayless Acquisition”). |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2021 | |
Discontinued Operations | |
Discontinued Operations | NOTE F—Discontinued Operations Magellan Complete Care – Stock and Asset Purchase Agreement On December 31, 2020, the Company completed the sale of its MCC Business to Molina, pursuant to a Stock and Asset Purchase Agreement, dated as of April 30, 2020, by and between the Company and Molina, for cash in the amount of $850 million plus closing adjustments of $158 million (subject to post-closing adjustments, if any), and the assumption by Molina of liabilities of the MCC Business. In connection with the MCC Sale, the Company and Molina have entered into commercial agreements for certain behavioral health, utilization management and related services to be provided by the Company to Molina and the MCC Business. These commercial agreements are subject to termination in connection with the Company’s pending Merger with Centene and may not be implemented. In addition, the parties entered into a transition services agreement pursuant to which the Company and certain of its affiliates provide, or cause third parties to provide, certain services to accommodate the transition of the MCC business to Molina. The foregoing description of the Purchase Agreement and the MCC Sale does not purport to be complete and is qualified in its entirety by the terms and conditions of the Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q which was filed with the SEC on May 11, 2020, and any related agreements. The accounting requirements for reporting a business to be divested as a discontinued operation were met during the second quarter of 2020. Accordingly, the accompanying consolidated financial statements for all periods presented reflect the MCC business as a discontinued operation. The following table summarizes the components of income from discontinued operations that is included in the Company’s consolidated income statements for the three months ended March 31, 2020 and 2021 (in thousands): Three Months Ended March 31, 2020 2021 Managed care and other revenue $ 720,034 $ — Costs and expenses: Cost of care 602,534 — Direct service costs and other operating expenses (1)(2)(3) 84,497 926 Depreciation and amortization 5,326 — Interest expense 71 — Interest and other income (2,540) — Total costs and expenses 689,888 926 Income (loss) from discontinued operation before income taxes 30,146 (926) Provision (benefit) for income taxes 10,826 (244) Net income (loss) from discontinued operations $ 19,320 $ (682) (1) Includes stock compensation expense of $260 for the three months ended March 31, 2020. (2) Includes divestiture related expenses of $605 for the three months ended March 31, 2020. (3) Includes changes in estimates and transition support services for the three months ended March 31, 2021. The Company has retained corporate overhead expenses previously allocated to MCC of $6.7 million for the three months ended March 31, 2020. |
Special Charges
Special Charges | 3 Months Ended |
Mar. 31, 2021 | |
Special Charges | |
Special Charges | NOTE G—Special Charges The following table summarizes the components of special charges that are included in the Company’s consolidated statement of comprehensive income for the three months ended March 31, 2021 (in thousands): Non-cash related special charges Right-of-use assets $ 1,263 Fixed assets 14 Total non-cash related special charges 1,277 Cash related special charges Employee severance and termination benefits (209) Lease shutdown costs 83 Total cash related special charges (126) Total special charges $ 1,151 Balance Balance December 31, March 31, 2020 Additions Payments 2021 Employee severance and termination benefits $ 10,983 $ (209) $ (1,019) $ 9,755 Lease shutdown costs 610 83 (83) 610 $ 11,593 $ (126) $ (1,102) $ 10,365 |
General (Policies)
General (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
General | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in the first quarter of 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company can include, among other things, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, stock compensation assumptions, tax contingencies and legal liabilities. In addition, the Company also makes estimates in relation to revenue recognition under Accounting Standard Codification 606 (“ASC 606”) which are explained in more detail in “ Revenue Recognition |
Revenue Recognition | Revenue Recognition Virtually all of the Company’s revenues are derived from business in North America. The following tables disaggregate our revenue for the three months ended March 31, 2020 and 2021 by major service line, type of customer and timing of revenue recognition (in thousands): Three Months Ended March 31, 2020 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 349,845 $ — $ (90) $ 349,755 EAP risk-based 79,938 — — 79,938 ASO 59,123 11,534 (83) 70,574 PBM, including dispensing — 518,112 (4,567) 513,545 Medicare Part D — 55,666 — 55,666 PBA — 30,129 — 30,129 Formulary management — 22,161 — 22,161 Other — 611 — 611 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Type of Customer Government $ 227,102 $ 203,957 $ — $ 431,059 Non-government 261,804 434,256 (4,740) 691,320 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Timing of Revenue Recognition Transferred at a point in time $ — $ 573,778 $ (4,567) $ 569,211 Transferred over time 488,906 64,435 (173) 553,168 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Three Months Ended March 31, 2021 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 373,442 $ — $ (86) $ 373,356 EAP risk-based 88,120 — — 88,120 ASO 71,448 11,817 (75) 83,190 PBM, including dispensing — 538,796 (3,399) 535,397 Medicare Part D — 176 — 176 PBA — 49,882 — 49,882 Formulary management — 29,183 — 29,183 Other — 2,345 — 2,345 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Type of Customer Government $ 256,292 $ 156,038 $ — $ 412,330 Non-government 276,718 476,161 (3,560) 749,319 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Timing of Revenue Recognition Transferred at a point in time $ — $ 538,972 $ (3,399) $ 535,573 Transferred over time 533,010 93,227 (161) 626,076 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Per Member Per Month (“PMPM”) Revenue. Pharmacy Benefit Management Revenue. The Company’s customers for PBM business, including pharmaceutical dispensing operations, are generally comprised of MCOs, employer groups and health plans. PBM relationships generally have an expected term of one year or longer. A master services arrangement (“MSA”) is executed by the Company and the customer, which outlines the terms and conditions of the PBM services to be provided. When a member in the customer’s organization submits a prescription, a claim is created which is presented for approval. The acceptance of each individual claim creates enforceable rights and obligations for each party and represents a separate contract. For each individual claim, the performance obligations are limited to the processing and adjudication of the claim, or dispensing of the products purchased. Generally, the transaction price for PBM services is explicitly listed in each contract and does not represent variable consideration. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co-payments and any associated administrative fees, when claims are adjudicated or the drugs are shipped. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co-payments) as it is acting as the principal in the arrangement, controls the underlying service, and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collecting payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client’s members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. For dispensing, at the time of shipment, the earnings process is complete; the obligation of the Company’s customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Pharmacy Benefit Administration Revenue. 2 Formulary Management Revenue. The Company administers formulary management programs for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Formulary management contracts generally have a term of one year or longer. All formulary management contracts have a single performance obligation that constitutes a series for the provision of rebate services for a drug, with utilization measured and settled on a quarterly basis, for the duration of the arrangement. The Company retains its administrative fee and/or a percentage of rebates that is included in its contract with the client from collecting the rebate from the manufacturer. While the administrative fee and/or the percentage of rebates retained is fixed, there is an unknown quantity of pharmaceutical purchases (utilization) during each quarter; therefore the transaction price itself is variable. The Company uses the expected value methodology to estimate the total rebates earned each quarter based on estimated volumes of pharmaceutical purchases by the Company’s clients during the quarter, as well as historical and/or anticipated retained rebate percentages. The Company does not record as rebate revenue any rebates that are passed through to its clients. In relation to the Company’s PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers is recorded as a reduction of cost of goods sold. Government EAP Risk-Based Revenue. The Company has certain contracts with federal customers for the provision of various managed care services, which are classified as EAP risk-based business. These contracts are generally multi-year arrangements. The Company’s federal contracts are reimbursed on either a fixed fee basis or a cost reimbursement basis. The performance obligation on a fixed fee contract is to stand ready to provide the staffing required for the contracted period. For fixed fee contracts, the Company believes the invoiced amount corresponds directly with the value to the customer of the Company’s performance completed to date; therefore, the Company is utilizing the “right to invoice” practical expedient, with revenue recognition in the amount for which the Company has the right to invoice. The performance obligation on a cost reimbursement contract is to stand ready to provide the activity or services purchased by the customer, such as the operation of a counseling services group or call center. The performance obligation represents a series for the duration of the arrangement. The reimbursement rate is fixed per the contract; however, the level of activity (e.g., number of hours, number of counselors or number of units) is variable. A majority of the Company’s cost reimbursement transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series (e.g. day or month) and is recognized as revenue when the portion of the series for which it relates has been provided (i.e. as the Company provides hours, counselors or units of service). In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the contracts in the Company’s PBM business, these reporting requirements are not applicable. The majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. For the Company’s contracts that pertain to these exemptions: (i) the remaining performance obligations primarily relate to the provision of managed healthcare services to the customers’ membership; (ii) the estimated remaining duration of these performance obligations ranges from the remainder of the current calendar year to three years; and (iii) variable consideration for these contracts primarily includes net PMPM fees associated with unspecified membership that fluctuates throughout the contract. Accounts Receivable, Contract Assets and Contract Liabilities Accounts receivable, contract assets and contract liabilities consisted of the following (in thousands, except percentages): December 31, March 31, 2020 2021 $ Change % Change Accounts receivable $ 799,803 $ 824,067 $ 24,264 3.0% Contract assets 3,566 4,678 1,112 31.2% Contract liabilities - current 6,772 6,968 196 2.9% Contract liabilities - long-term 11,073 11,453 380 3.4% Accounts receivable, which are included in accounts receivable, other current assets and other long-term assets on the consolidated balance sheets, increased by $24.3 million, mainly due to timing of receipts. Contract assets, which are included in other current assets on the consolidated balance sheets, increased by $1.1 million, mainly due to the timing of accrual of certain performance incentives. Contract liabilities – current, which are included in accrued liabilities on the consolidated balance sheets, increased by $0.2 million, mainly due to certain revenue payments received in advance. Contract liabilities – long-term, which are included in deferred credits and other long-term liabilities on the consolidated balance sheets, increased by $0.4 million mainly due to payments received for which recognition will be long term partially offset by certain balances which became current. During the three months ended March 31 2021, the Company recognized revenue of $2.0 million that was included in current contract liabilities at December 31, 2020. The estimated timing of recognition of amounts included in contract liabilities at March 31, 2021 are as follows: 202 1—$6.0 million; 2022 —$4.0 million; 2023 —$3.6 million; 2024 and beyond —$4.8 million. During the three months ended March 31, 2021, the revenue the Company recognized related to performance obligations that were satisfied, or partially satisfied, in previous periods was not material. The Company’s accounts receivable consists of amounts due from customers throughout the United States. Collateral is generally not required. A majority of the Company’s contracts have payment terms in the month of service, or within a few months thereafter. The timing of payments from customers from time to time generates contract assets or contract liabilities; however, these amounts are immaterial. The Company’s accounts receivable is net of an allowance for credit losses. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management elected to disaggregate trade receivables into business segments due to risk characteristics unique to each platform given the individual lines of business and market. Pooling was further disaggregated based on either geography or product type. The Company leveraged historical write offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts through the use of an adjustment for current and projected macroeconomic factors. Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses, giving consideration to the location and risks associated with the Company’s customers. Significant Customers Customers exceeding ten percent of the consolidated Company’s net revenues Customers exceeding ten percent of segment net revenues The following customers generated in excess of ten percent of net revenues from continuing operations for the respective segment for the three months ended March 31, 2020 and 2021 (in thousands): Segment Term Date 2020 2021 Healthcare Customer A December 31, 2021 $ 88,539 $ 92,982 Customer B December 31, 2022 49,438 55,486 Pharmacy Management Customer C March 31, 2024 98,617 88,651 Concentration of Business The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the “Pennsylvania Counties”) which are part of the Pennsylvania Medicaid program, with members under its contract with Centers for Medicare and Medicaid Services (“CMS”) and with various agencies and departments of the United States federal government. Net revenues from the Pennsylvania Counties in the aggregate totaled $137.0 million and $152.7 million for the three months ended March 31, 2020 and 2021, respectively. Net revenues from members in relation to its contracts with CMS in aggregate totaled $55.7 million and $0.2 million for the three months ended March 31, 2020 and 2021, respectively. As of December 31, 2020 and March 31, 2021, the Company had $69.6 million and $55.2 million, respectively, in net receivables associated with Medicare Part D from CMS and other parties related to this business. In May 2020, the Company announced its decision to exit the Part D business at the end of 2020. Net revenues from contracts with various agencies and departments of the United States federal government in aggregate totaled $69.9 million and $77.7 million for the three months ended March 31, 2020 and 2021, respectively. The Company’s contracts with customers typically have stated terms of one one |
Leases | Leases The Company leases certain office space, distribution centers, land and equipment. We assess each contract to determine if it contains a lease. This assessment is based on (i) the right to control the use of an identified asset; (ii) the right to obtain substantially all of the economic benefits from the use of the identified asset; and (iii) the right to use the identified asset. The Company elected the short-term lease practical expedient; thus, leases with an initial term of twelve months or less are not capitalized and the expense is recognized on a straight-line basis. Most leases include one or more options to renew, with renewal terms that can extend the lease from one Operating leases are included in other long-term assets, accrued liabilities and deferred credits and other long-term liabilities in the consolidated balance sheets. Finance leases are included in property and equipment, current debt, finance lease deferred financing obligations and long-term debt, finance lease and deferred financing obligations in the consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments per the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. As the rate implicit in most of our leases is not readily determinable, the Company used its incremental borrowing rate to determine the present value of lease payments. The following table shows the components of lease expenses for the three months ended March 31, 2021 (in thousands): Three Months Ended March 31, 2021 Operating lease cost $ 2,408 Finance lease cost: Amortization of right-of-use asset 707 Interest on lease liabilities 166 Total finance lease cost 873 Short-term lease cost 40 Variable lease cost 224 Total lease cost 3,545 Sublease income (7) Net lease cost $ 3,538 The following table shows the components of the lease assets and liabilities as of March 31, 2021 (in thousands): March 31, 2021 Operating leases: Other long-term assets $ 32,053 Accrued liabilities $ 10,597 Deferred credits and other long-term liabilities 33,626 Total operating lease liabilities $ 44,223 Finance leases: Property and equipment, net $ 12,183 Current debt, finance lease and deferred financing obligations $ 4,455 Long-term debt, finance lease and deferred financing obligations 10,783 Total finance lease liabilities $ 15,238 The maturity dates of the Company’s leases as of March 31, 2021 are summarized below (in thousands): March 31, 2021 2021 $ 11,819 2022 14,893 2023 12,399 2024 10,616 2025 5,358 2026 and beyond 5,556 Total lease payments 60,641 Less interest (1,180) Present value of lease liabilities $ 59,461 The following table shows the weighted average remaining lease term and discount rate as of March 31, 2021: March 31, 2021 Weighted average remaining lease term years Operating leases 4.98 Finance leases 3.52 Weighted average discount rate Operating leases 3.18% Finance leases 4.40% Year ended March 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,661 Operating cash flows from finance leases 1,121 Financing cash flows from finance leases 166 Right-of-use asset obtained in exchange for new lease obligation Operating leases — Finance leases — |
Fair Value Measurements | Fair Value Measurements The Company has certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3—Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company’s data. In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2020 and March 31, 2021 (in thousands): December 31, 2020 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 679,554 $ — $ 679,554 Investments: U.S. Government and agency securities 42,399 — — 42,399 Corporate debt securities — 99,749 — 99,749 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 42,399 $ 780,614 $ — $ 823,013 March 31, 2021 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (2) $ — $ 447,627 $ — $ 447,627 Investments: U.S. Government and agency securities 332,403 — — 332,403 Corporate debt securities — 296,716 — 296,716 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 332,403 $ 745,654 $ — $ 1,078,057 (1) Excludes $464.9 million of cash held in bank accounts by the Company. (2) Excludes $8.7 million of cash held in bank accounts by the Company. For the three months ended March 31, 2021, the Company has not transferred any assets between fair value measurement levels. The carrying values of financial instruments, including accounts receivable and accounts payable, approximate their fair values due to their short-term maturities. The fair value of the Notes (as defined below) of $387.4 million as of March 31, 2021 was determined based on quoted market prices and would be classified within Level 1 of the fair value hierarchy. The estimated fair value of the Company’s term loan of $158.8 million as of March 31, 2021 was based on current interest rates for similar types of borrowings and is in Level 2 of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. All of the Company’s investments are classified as “available-for-sale” and are carried at fair value. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents are short-term, highly liquid interest-bearing investments with maturity dates of three months or less when purchased, consisting primarily of money market instruments. Book overdrafts are reflected within accounts payable on the balance sheets. At March 31, 2021, the Company had book overdrafts of $2.1 million. At March 31, 2021, the Company’s excess capital and undistributed earnings for the Company’s regulated subsidiaries of approximately $50 million are included in cash and cash equivalents. |
Investments | Investments If a debt security is in an unrealized loss position and the Company has the intent to sell the debt security, or it is more likely than not that the Company will have to sell the debt security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to other-than-temporary impairment losses recognized in income in the consolidated statements of comprehensive income. For impaired debt securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in other-than-temporary impairment losses recognized in net income and the non-credit component of the other-than-temporary impairment is recognized in other comprehensive income in the consolidated statements of comprehensive income. As of December 31, 2020 and March 31, 2021, there were no material unrealized losses that the Company determined to be other-than-temporary. No realized gains or losses were recorded for the three months ended March 31, 2020 or 2021. The following is a summary of short-term and long-term investments at December 31, 2020 and March 31, 2021 (in thousands): December 31, 2020 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 42,389 $ 11 $ (1) $ 42,399 Corporate debt securities 99,861 3 (115) 99,749 Certificates of deposit 1,311 — — 1,311 Total investments at December 31, 2020 $ 143,561 $ 14 $ (116) $ 143,459 March 31, 2021 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 332,375 $ 29 $ (1) $ 332,403 Corporate debt securities 296,833 14 (131) 296,716 Certificates of deposit 1,311 — — 1,311 Total investments at March 31, 2021 $ 630,519 $ 43 $ (132) $ 630,430 The maturity dates of the Company’s investments as of March 31, 2021 are summarized below (in thousands): Amortized Estimated Cost Fair Value 2021 $ 625,439 $ 625,350 2022 5,080 5,080 Total investments at March 31, 2021 $ 630,519 $ 630,430 |
Income Taxes | Income Taxes The Company’s effective income tax rates from continuing operations were 122.8 percent and 27.7 percent for the three months ended March 31, 2020 and 2021, respectively. These rates differ from the applicable federal statutory income tax rate primarily due to state income taxes and permanent differences between book and tax income. The Company also accrues interest and penalties related to uncertain tax positions in its provision for income taxes. The significant effective income tax rate for the three months ended March 31, 2020 is primarily due to the impact of the non-deductible health insurance fee (“HIF”) relative to the reduced level of earnings of the period. Congress repealed the HIF effective for plan years after December 31, 2020. The Company files a consolidated federal income tax return with its eighty-percent or more controlled subsidiaries. The Company and its subsidiaries also file income tax returns in various state and local jurisdictions. The Coronavirus Aid, Relief, and Economic Security Act was signed into law on March 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law on December 27, 2020 and The American Rescue Plan Act of 2021 was signed March 11, 2021. All three acts provide widespread emergency relief for the economy and aid to corporations including several significant provisions related to taxes. As of March 31, 2021, the Company has not utilized (nor does it anticipate utilizing) any of the provisions that would result in a material impact on its results. State Net Operating Loss Carryforwards The Company and its subsidiaries have $75.0 million of net operating loss carryovers (“NOLs”) available to reduce state and local taxable income at certain subsidiaries in 2021 and subsequent years. Most of these NOLs will expire in 2021 through 2038 if not used and are subject to examination and adjustment by the respective tax authorities. In addition, the Company’s utilization of certain of these NOLs is subject to limitations as to the timing and use. Other than those considered in determining the valuation allowances discussed below, the Company does not believe these limitations will restrict the Company’s ability to use any of these state and local NOLs before they expire. |
Health Care Reform | Health Care Reform |
Goodwill | Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 278,945 $ 99.80 Awarded — — Vested — — Forfeited (63,324) 141.61 Outstanding, end of period 215,621 87.51 |
Stock Compensation | Sto ck Compensation At December 31, 2020 and March 31, 2021, the Company had equity-based employee incentive plans, which are described more fully in Note 6 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021. The Company recorded stock compensation expense of $7.1 million for the three months ended March 31, 2021. Stock compensation expense recognized in the consolidated statements of comprehensive income for the three months ended March 31, 2020 and 2021 has been reduced for forfeitures, estimated at between zero and four percent for all periods. For the three months ended March 31, 2020, tax expense on deficiencies (net of the tax deductions in excess of recognized stock compensation expense) was $1.4 million, which was included as an increase to income tax expense. For the three months ended March 31, 2021, the benefit of tax deductions in excess of recognized stock compensation expense (net of deficiencies) was $1.1 million, which was included as a reduction of income tax expense. Summarized information related to the Company’s stock options for the three months ended March 31, 2021 is as follows: Weighted Average Exercise Options Price Outstanding, beginning of period 1,045,283 $ 75.48 Granted — — Forfeited (19,960) 89.13 Exercised (109,381) 68.26 Outstanding, end of period 915,942 $ 76.05 Vested and expected to vest at end of period 914,068 $ 76.07 Exercisable, end of period 816,244 $ 77.24 Summarized information related to the Company’s nonvested restricted stock awards (“RSAs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 54,314 $ 77.33 Awarded — — Vested — — Forfeited — — Outstanding, ending of period 54,314 77.33 Summarized information related to the Company’s nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 428,362 $ 65.83 Awarded 275,619 92.85 Vested (148,546) 67.77 Forfeited (887) 70.40 Outstanding, ending of period 554,548 78.73 Summarized information related to the Company’s nonvested restricted performance stock units (“PSUs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 278,945 $ 99.80 Awarded — — Vested — — Forfeited (63,324) 141.61 Outstanding, end of period 215,621 87.51 |
Long Term Debt and Finance Lease Obligations | Long-Term Debt and Finance Lease Obligations December 31, March 31, 2020 2021 Senior Notes $ 359,632 $ 359,656 Term loan 263,125 158,750 Other loan 2,154 2,154 Finance leases - land and equipment 16,359 15,238 Finance leases - software as service arrangements 1,298 1,288 Deferred loan costs (4,192) (3,861) Total debt and finance lease obligations $ 638,376 $ 533,225 Senior Notes On September 22, 2017, the Company completed the public offering of $400.0 million aggregate principal amount of its 4.400% Senior Notes due 2024 (the “Notes”). The Notes are governed by an indenture dated as of September 22, 2017 (the “Base Indenture”), between the Company, as issuer, and U.S. Bank National Association, as trustee, and is supplemented by a first supplemental indenture dated as of September 22, 2017 (the “First Supplemental Indenture” together, with the Base Indenture, the “Indenture”), between the Company, as issuer, and U.S. Bank National Association, as trustee. Since the public offering, the Company purchased and subsequently retired $40.0 million of it’s Notes, of which $28.9 million was purchased and subsequently retired in March 2020 that resulted in a loss on retirement of $0.7 million that is included in interest expense. The Notes were issued at a discount and had a carrying value of $359.6 million and $359.7 million at December 31, 2020 and March 31, 2021, respectively. The Notes bear interest payable semiannually in cash in arrears on March 22 and September 22 of each year, commencing on March 22, 2018, which rate is subject to an interest rate adjustment upon the occurrence of certain credit rating events. The interest rate on the Notes on March 31, 2021 was 4.900%. The Notes mature on September 22, 2024. The Indenture provides that the Notes are redeemable at the Company’s option, in whole or in part, at any time on or after July 22, 2024, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date. The Indenture also contains certain covenants which restrict the Company’s ability to, among other things, create liens on its and its subsidiaries’ assets; engage in sale and lease-back transactions; and engage in a consolidation, merger or sale of assets. Credit Agreement On September 22, 2017, the Company entered into a credit agreement with various lenders that provides for a $400.0 million senior unsecured revolving credit facility and a $350.0 million senior unsecured term loan facility to the Company, as the borrower (the “2017 Credit Agreement”). On August 13, 2018, the Company entered into an amendment to the 2017 Credit Agreement, which extended the maturity date by one year. On February 27, 2019, the Company entered into a second amendment to the 2017 Credit Agreement, which amended the total leverage ratio covenant through December 31, 2019, and which was necessary in order for the Company to remain in compliance with the terms of the 2017 Credit Agreement. The 2017 Credit Agreement is scheduled to mature on September 22, 2023. Under the 2017 Credit Agreement, the annual interest rate on the loan borrowing is equal to (i) in the case of base rate loans, the sum of an initial borrowing margin of 0.500 percent plus the higher of the prime rate, one-half of one by certain rating agencies. The Company has the option to borrow in base rate loans or Eurodollar rate loans at its discretion. The Company has elected to borrow in Eurodollar rate loans that currently have a borrowing margin of 1.75 percent plus the Eurodollar rate for the selected interest period. For three months ended March 31, 2021, the weighted average interest rate on the term loan facility was approximately 2.01 percent. The interest rate on the term loan facility was 1.86% on March 31, 2021. The term loan facility balance under the 2017 Credit Agreement totaled $263.1 million and $158.8 million as of December 31, 2020 and March 31, 2021, respectively. In March 2021, the Company made voluntary term loan repayments of $100.0 million. As of March 31, 2021, the contractual maturities, totaling $158.8 million of the term loan under the 2017 Credit Agreement were as follows: 2021—$0.0 million; 2022—$0.0 million; and 2023—$158.8 million. Due to the timing of working capital needs, the Company will periodically borrow from the revolving loan under the 2017 Credit Agreement. At December 31, 2020 and March 31, 2021, the Company had no revolving loans, resulting in borrowing capacity of $400.0 million under the 2017 Credit Agreement. Included in long-term debt, finance lease and deferred financing obligations are deferred loan and bond issuance costs as of December 31, 2020 and March 31, 2021 of $4.2 million and $3.9 million, respectively. Letter of Credit Agreement On August 22, 2017, the Company entered into a Continuing Agreement for Standby Letters of Credit with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”), as issuer (the “L/C Agreement”), under which BTMU, at its sole discretion, may provide stand-by letter of credit to the Company. The Company had letters of credit outstanding under the L/C Agreement as of December 31, 2020 and March 31, 2021 of $32.1 million and $33.0 million, respectively. Finance Lease and Deferred Financing Obligations There were $16.4 million and $15.2 million of finance lease and deferred financing obligations at December 31, 2020 and March 31, 2021, respectively. The Company’s finance lease and deferred financing obligations represent amounts due under leases for certain properties, computer software (acquired prior to the prospective adoption of ASU 2015-05 on January 1, 2016) and equipment. The recorded gross cost of finance lease assets was $43.0 million and $43.0 million at December 31, 2020 and March 31, 2021, respectively. |
Redeemable Non-Controlling Interest | Redeemable Non-Controlling Interest As of March 31, 2021, the Company held a 70% equity interest in Aurelia Health, LLC (“Aurelia”). The other shareholders of Aurelia have the right to exercise put options, requiring the Company to purchase up to 33.3% of the remaining shares during the thirty-day period beginning on January 15, 2022 and each subsequent anniversary thereafter. In addition, for the thirty-day period beginning on January 15, 2022 and each subsequent anniversary thereafter, the Company has the right to purchase 33.3% of the remaining shares (“call option”). The redemption price for these put and call options is based on a fixed multiple of the trailing twelve-month EBITDA at the redemption date. Non-controlling interests with redemption features, such as put options, that are not solely within the Company’s control are considered redeemable non-controlling interests. Redeemable non-controlling interest is considered to be temporary and is therefore reported in a mezzanine level between liabilities and stockholders’ equity on the Company’s consolidated balance sheet at the greater of the initial carrying amount adjusted for the non-controlling interest’s share of net income or loss or its redemption value. The carrying value of the non-controlling interest as of December 31, 2020 and March 31, 2021 was $33.1 million and $33.3 million, respectively. The Company evaluates the redemption value on a quarterly basis. If the redemption value is greater than the carrying value, the Company will adjust the carrying amount of the non-controlling interest to equal the redemption value at the end of each reporting period. Under this method, this is viewed at the end of the reporting period as if it were also the redemption date for the non-controlling interest. The Company will reflect redemption value adjustments in the earnings per share (“EPS”) calculation if redemption value is in excess of the carrying value of the non-controlling interest. As of March 31, 2021, the carrying value of the non-controlling interest exceeded the redemption value and therefore no adjustment to the carrying value was required. |
General (Tables)
General (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
General | |
Schedule of disaggregation of revenue by major service line, type of customer and timing of revenue recognition | Three Months Ended March 31, 2020 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 349,845 $ — $ (90) $ 349,755 EAP risk-based 79,938 — — 79,938 ASO 59,123 11,534 (83) 70,574 PBM, including dispensing — 518,112 (4,567) 513,545 Medicare Part D — 55,666 — 55,666 PBA — 30,129 — 30,129 Formulary management — 22,161 — 22,161 Other — 611 — 611 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Type of Customer Government $ 227,102 $ 203,957 $ — $ 431,059 Non-government 261,804 434,256 (4,740) 691,320 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Timing of Revenue Recognition Transferred at a point in time $ — $ 573,778 $ (4,567) $ 569,211 Transferred over time 488,906 64,435 (173) 553,168 Total net revenue $ 488,906 $ 638,213 $ (4,740) $ 1,122,379 Three Months Ended March 31, 2021 Healthcare Pharmacy Management Elimination Total Major Service Lines Behavioral & Specialty Health Risk-based, non-EAP $ 373,442 $ — $ (86) $ 373,356 EAP risk-based 88,120 — — 88,120 ASO 71,448 11,817 (75) 83,190 PBM, including dispensing — 538,796 (3,399) 535,397 Medicare Part D — 176 — 176 PBA — 49,882 — 49,882 Formulary management — 29,183 — 29,183 Other — 2,345 — 2,345 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Type of Customer Government $ 256,292 $ 156,038 $ — $ 412,330 Non-government 276,718 476,161 (3,560) 749,319 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 Timing of Revenue Recognition Transferred at a point in time $ — $ 538,972 $ (3,399) $ 535,573 Transferred over time 533,010 93,227 (161) 626,076 Total net revenue $ 533,010 $ 632,199 $ (3,560) $ 1,161,649 |
Schedule of accounts receivable, contract assets and contract liabilities | December 31, March 31, 2020 2021 $ Change % Change Accounts receivable $ 799,803 $ 824,067 $ 24,264 3.0% Contract assets 3,566 4,678 1,112 31.2% Contract liabilities - current 6,772 6,968 196 2.9% Contract liabilities - long-term 11,073 11,453 380 3.4% |
Schedule of customers generating in excess of ten percent of net revenues for respective segment | Segment Term Date 2020 2021 Healthcare Customer A December 31, 2021 $ 88,539 $ 92,982 Customer B December 31, 2022 49,438 55,486 Pharmacy Management Customer C March 31, 2024 98,617 88,651 |
Schedule of leases | Three Months Ended March 31, 2021 Operating lease cost $ 2,408 Finance lease cost: Amortization of right-of-use asset 707 Interest on lease liabilities 166 Total finance lease cost 873 Short-term lease cost 40 Variable lease cost 224 Total lease cost 3,545 Sublease income (7) Net lease cost $ 3,538 March 31, 2021 Operating leases: Other long-term assets $ 32,053 Accrued liabilities $ 10,597 Deferred credits and other long-term liabilities 33,626 Total operating lease liabilities $ 44,223 Finance leases: Property and equipment, net $ 12,183 Current debt, finance lease and deferred financing obligations $ 4,455 Long-term debt, finance lease and deferred financing obligations 10,783 Total finance lease liabilities $ 15,238 March 31, 2021 Weighted average remaining lease term years Operating leases 4.98 Finance leases 3.52 Weighted average discount rate Operating leases 3.18% Finance leases 4.40% Year ended March 31, 2021 |
Schedule of maturity dates of leases | March 31, 2021 2021 $ 11,819 2022 14,893 2023 12,399 2024 10,616 2025 5,358 2026 and beyond 5,556 Total lease payments 60,641 Less interest (1,180) Present value of lease liabilities $ 59,461 |
Schedule of fair value of financial assets and liabilities | December 31, 2020 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 679,554 $ — $ 679,554 Investments: U.S. Government and agency securities 42,399 — — 42,399 Corporate debt securities — 99,749 — 99,749 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 42,399 $ 780,614 $ — $ 823,013 March 31, 2021 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (2) $ — $ 447,627 $ — $ 447,627 Investments: U.S. Government and agency securities 332,403 — — 332,403 Corporate debt securities — 296,716 — 296,716 Certificates of deposit — 1,311 — 1,311 Total assets held at fair value $ 332,403 $ 745,654 $ — $ 1,078,057 (1) Excludes $464.9 million of cash held in bank accounts by the Company. (2) Excludes $8.7 million of cash held in bank accounts by the Company. |
Summary of short-term and long-term investments | December 31, 2020 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 42,389 $ 11 $ (1) $ 42,399 Corporate debt securities 99,861 3 (115) 99,749 Certificates of deposit 1,311 — — 1,311 Total investments at December 31, 2020 $ 143,561 $ 14 $ (116) $ 143,459 March 31, 2021 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 332,375 $ 29 $ (1) $ 332,403 Corporate debt securities 296,833 14 (131) 296,716 Certificates of deposit 1,311 — — 1,311 Total investments at March 31, 2021 $ 630,519 $ 43 $ (132) $ 630,430 |
Summary of maturity dates of investments | Amortized Estimated Cost Fair Value 2021 $ 625,439 $ 625,350 2022 5,080 5,080 Total investments at March 31, 2021 $ 630,519 $ 630,430 |
Schedule of stock option activity | Summarized information related to the Company’s stock options for the three months ended March 31, 2021 is as follows: Weighted Average Exercise Options Price Outstanding, beginning of period 1,045,283 $ 75.48 Granted — — Forfeited (19,960) 89.13 Exercised (109,381) 68.26 Outstanding, end of period 915,942 $ 76.05 Vested and expected to vest at end of period 914,068 $ 76.07 Exercisable, end of period 816,244 $ 77.24 Summarized information related to the Company’s nonvested restricted stock awards (“RSAs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 54,314 $ 77.33 Awarded — — Vested — — Forfeited — — Outstanding, ending of period 54,314 77.33 Summarized information related to the Company’s nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 428,362 $ 65.83 Awarded 275,619 92.85 Vested (148,546) 67.77 Forfeited (887) 70.40 Outstanding, ending of period 554,548 78.73 |
Schedule of nonvested restricted stock award activity | Weighted Average Exercise Options Price Outstanding, beginning of period 1,045,283 $ 75.48 Granted — — Forfeited (19,960) 89.13 Exercised (109,381) 68.26 Outstanding, end of period 915,942 $ 76.05 Vested and expected to vest at end of period 914,068 $ 76.07 Exercisable, end of period 816,244 $ 77.24 |
Schedule of nonvested restricted stock units | Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 54,314 $ 77.33 Awarded — — Vested — — Forfeited — — Outstanding, ending of period 54,314 77.33 |
Schedule of nonvested restricted performance stock units | Summarized information related to the Company’s nonvested restricted performance stock units (“PSUs”) for the three months ended March 31, 2021 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 278,945 $ 99.80 Awarded — — Vested — — Forfeited (63,324) 141.61 Outstanding, end of period 215,621 87.51 |
Schedule of the components of debt and finance lease obligations | December 31, March 31, 2020 2021 Senior Notes $ 359,632 $ 359,656 Term loan 263,125 158,750 Other loan 2,154 2,154 Finance leases - land and equipment 16,359 15,238 Finance leases - software as service arrangements 1,298 1,288 Deferred loan costs (4,192) (3,861) Total debt and finance lease obligations $ 638,376 $ 533,225 |
Net Income per Common Share A_2
Net Income per Common Share Attributable to Magellan Health, Inc. (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Net Income per Common Share Attributable to Magellan Health, Inc. | |
Schedule of computation of basic and diluted earnings per share | The following table reconciles income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data) for the three months ended March 31: Three Months Ended March 31, 2020 2021 Numerator: Net (loss) income from continuing operations $ (1,070) $ 28,509 Income (loss) from discontinued operations, net of tax 19,320 (682) Net income $ 18,250 $ 27,827 Denominator: Weighted average number of common shares outstanding—basic 24,728 25,948 Common stock equivalents—stock options 61 186 Common stock equivalents—RSAs 21 19 Common stock equivalents—RSUs 50 196 Common stock equivalents—PSUs — 201 Common stock equivalents—employee stock purchase plan 9 3 Weighted average number of common shares outstanding—diluted 24,869 26,553 Net (loss) income per common share—basic: Continuing operations $ (0.04) $ 1.10 Discontinued operations 0.78 (0.03) Consolidated operations $ 0.74 $ 1.07 Net (loss) income per common share—diluted: Continuing operations $ (0.04) $ 1.07 Discontinued operations 0.78 (0.03) Consolidated operations $ 0.74 $ 1.04 |
Business Segment Information (T
Business Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Business Segment Information | |
Schedule of operating results by business segment | The following tables summarize, for the periods indicated, operating results by business segment (in thousands): Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2020 Managed care and other revenue $ 488,906 $ 64,435 $ (173) $ 553,168 PBM revenue — 573,778 (4,567) 569,211 Cost of care (349,108) — — (349,108) Cost of goods sold — (537,574) 4,333 (533,241) Direct service costs and other (105,936) (81,866) (16,439) (204,241) Stock compensation expense (1) 1,761 2,107 1,929 5,797 Segment Profit (Loss) $ 35,623 $ 20,880 $ (14,917) $ 41,586 Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2021 Managed care and other revenue $ 533,010 $ 93,227 $ (161) $ 626,076 PBM revenue — 538,972 (3,399) 535,573 Cost of care (379,191) — — (379,191) Cost of goods sold — (495,593) 3,223 (492,370) Direct service costs and other (114,993) (104,596) (11,432) (231,021) Legal matter settlement — 9,000 — 9,000 Stock compensation expense (1) 2,519 2,696 1,842 7,057 Segment Profit (Loss) $ 41,345 $ 43,706 $ (9,927) $ 75,124 (1) Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to acquisitions and impairment of intangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit. |
Schedule of reconciliation of Segment Profit to income before income taxes | The following table reconciles income from continuing operations before income taxes to Segment Profit from continuing operations (in thousands): Three Months Ended March 31, 2020 2021 Income from continuing operations before income taxes $ 4,692 $ 39,414 Stock compensation expense 5,797 7,057 Depreciation and amortization 23,358 21,417 Interest expense 8,958 6,426 Interest and other income (1,219) (341) Special charges — 1,151 Segment Profit from continuing operations $ 41,586 $ 75,124 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies | |
Schedule of stock repurchases made | Total Number Average of Shares Price Paid Aggregate Period Purchased per Share Cost October 26, 2015 - December 31, 2015 345,044 $ 53.46 $ 18.4 January 1, 2016 - December 31, 2016 1,828,183 58.40 106.8 January 1, 2017 - December 31, 2017 280,140 77.67 21.8 January 1, 2018 - December 31, 2018 844,872 74.59 63.0 January 1, 2019 - December 31, 2019 60,901 61.15 3.7 January 1, 2020 - December 31, 2020 — — — January 1, 2021 - March 31, 2021 — — — 3,359,140 $ 213.7 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Discontinued Operations | |
Summary of the components of income from discontinued operation | Three Months Ended March 31, 2020 2021 Managed care and other revenue $ 720,034 $ — Costs and expenses: Cost of care 602,534 — Direct service costs and other operating expenses (1)(2)(3) 84,497 926 Depreciation and amortization 5,326 — Interest expense 71 — Interest and other income (2,540) — Total costs and expenses 689,888 926 Income (loss) from discontinued operation before income taxes 30,146 (926) Provision (benefit) for income taxes 10,826 (244) Net income (loss) from discontinued operations $ 19,320 $ (682) (1) Includes stock compensation expense of $260 for the three months ended March 31, 2020. (2) Includes divestiture related expenses of $605 for the three months ended March 31, 2020. (3) Includes changes in estimates and transition support services for the three months ended March 31, 2021. |
Special Charges (Tables)
Special Charges (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Special Charges | |
Summary of the components of special charges | Non-cash related special charges Right-of-use assets $ 1,263 Fixed assets 14 Total non-cash related special charges 1,277 Cash related special charges Employee severance and termination benefits (209) Lease shutdown costs 83 Total cash related special charges (126) Total special charges $ 1,151 |
Roll-forward of the Transformation Initiative liabilities | Balance Balance December 31, March 31, 2020 Additions Payments 2021 Employee severance and termination benefits $ 10,983 $ (209) $ (1,019) $ 9,755 Lease shutdown costs 610 83 (83) 610 $ 11,593 $ (126) $ (1,102) $ 10,365 |
General - Discontinued Operatio
General - Discontinued Operations (Details) - USD ($) $ / shares in Units, $ in Millions | Jan. 04, 2021 | Mar. 31, 2021 | Dec. 31, 2020 |
Merger Agreement | |||
Discontinued Operations | |||
Cash price paid per share | $ 95 | ||
MCC Business | Discontinued Operations, Disposed of by Sale | |||
Discontinued Operations | |||
Disposal Group, Including Discontinued Operation, Consideration | $ 850 | $ 850 | |
Disposal Group, Including Discontinued Operation, Consideration, Closing Adjustments | $ 158 | $ 158 |
General - Business Overview (De
General - Business Overview (Details) | 3 Months Ended |
Mar. 31, 2021segment | |
General | |
Number of segments | 3 |
General - Revenue Recognition (
General - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating results by business segment | ||
Net revenue | $ 1,161,649 | $ 1,122,379 |
Transferred at a point in time | ||
Operating results by business segment | ||
Net revenue | 535,573 | 569,211 |
Transferred over time | ||
Operating results by business segment | ||
Net revenue | 626,076 | 553,168 |
Government | ||
Operating results by business segment | ||
Net revenue | 412,330 | 431,059 |
Non-government | ||
Operating results by business segment | ||
Net revenue | 749,319 | 691,320 |
Behavioral & Specialty Health, risk-based, non-EAP | ||
Operating results by business segment | ||
Net revenue | 373,356 | 349,755 |
Behavioral & Specialty Health, EAP risk-based | ||
Operating results by business segment | ||
Net revenue | 88,120 | 79,938 |
Behavioral & Specialty Health, ASO | ||
Operating results by business segment | ||
Net revenue | 83,190 | 70,574 |
PBM, including dispensing | ||
Operating results by business segment | ||
Net revenue | 535,397 | 513,545 |
Medicare Part D | ||
Operating results by business segment | ||
Net revenue | 176 | 55,666 |
PBA | ||
Operating results by business segment | ||
Net revenue | 49,882 | 30,129 |
Formulary management | ||
Operating results by business segment | ||
Net revenue | 22,161 | |
Formulary management | Government | ||
Operating results by business segment | ||
Net revenue | 29,183 | |
Other service lines | ||
Operating results by business segment | ||
Net revenue | 611 | |
Other service lines | Non-government | ||
Operating results by business segment | ||
Net revenue | 2,345 | |
Healthcare | ||
Operating results by business segment | ||
Net revenue | 533,010 | 488,906 |
Healthcare | Transferred over time | ||
Operating results by business segment | ||
Net revenue | 533,010 | 488,906 |
Healthcare | Government | ||
Operating results by business segment | ||
Net revenue | 256,292 | 227,102 |
Healthcare | Non-government | ||
Operating results by business segment | ||
Net revenue | 276,718 | 261,804 |
Healthcare | Behavioral & Specialty Health, risk-based, non-EAP | ||
Operating results by business segment | ||
Net revenue | 373,442 | 349,845 |
Healthcare | Behavioral & Specialty Health, EAP risk-based | ||
Operating results by business segment | ||
Net revenue | 88,120 | 79,938 |
Healthcare | Behavioral & Specialty Health, ASO | ||
Operating results by business segment | ||
Net revenue | 71,448 | 59,123 |
Pharmacy Management | ||
Operating results by business segment | ||
Net revenue | 632,199 | 638,213 |
Pharmacy Management | Transferred at a point in time | ||
Operating results by business segment | ||
Net revenue | 538,972 | 573,778 |
Pharmacy Management | Transferred over time | ||
Operating results by business segment | ||
Net revenue | 93,227 | 64,435 |
Pharmacy Management | Government | ||
Operating results by business segment | ||
Net revenue | 156,038 | 203,957 |
Pharmacy Management | Non-government | ||
Operating results by business segment | ||
Net revenue | 476,161 | 434,256 |
Pharmacy Management | Behavioral & Specialty Health, ASO | ||
Operating results by business segment | ||
Net revenue | 11,817 | 11,534 |
Pharmacy Management | PBM, including dispensing | ||
Operating results by business segment | ||
Net revenue | 538,796 | 518,112 |
Pharmacy Management | Medicare Part D | ||
Operating results by business segment | ||
Net revenue | 176 | 55,666 |
Pharmacy Management | PBA | ||
Operating results by business segment | ||
Net revenue | 49,882 | 30,129 |
Pharmacy Management | Formulary management | ||
Operating results by business segment | ||
Net revenue | 22,161 | |
Pharmacy Management | Formulary management | Government | ||
Operating results by business segment | ||
Net revenue | 29,183 | |
Pharmacy Management | Other service lines | ||
Operating results by business segment | ||
Net revenue | 611 | |
Pharmacy Management | Other service lines | Non-government | ||
Operating results by business segment | ||
Net revenue | 2,345 | |
Elimination | ||
Operating results by business segment | ||
Net revenue | (3,560) | (4,740) |
Elimination | Transferred at a point in time | ||
Operating results by business segment | ||
Net revenue | (3,399) | (4,567) |
Elimination | Transferred over time | ||
Operating results by business segment | ||
Net revenue | (161) | (173) |
Elimination | Non-government | ||
Operating results by business segment | ||
Net revenue | (3,560) | (4,740) |
Elimination | Behavioral & Specialty Health, risk-based, non-EAP | ||
Operating results by business segment | ||
Net revenue | (86) | (90) |
Elimination | Behavioral & Specialty Health, ASO | ||
Operating results by business segment | ||
Net revenue | (75) | (83) |
Elimination | PBM, including dispensing | ||
Operating results by business segment | ||
Net revenue | $ (3,399) | $ (4,567) |
General - Per Member Per Month
General - Per Member Per Month Revenue (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Operating results by business segment | |
Required notice to terminate PMPM contract | 30 days |
Minimum | |
Operating results by business segment | |
Term of PMPM contract | 1 year |
General - Pharmacy Benefit Mana
General - Pharmacy Benefit Management Revenue (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Minimum | |
Operating results by business segment | |
Expected term of PBM relationship | 1 year |
General - Pharmacy Benefit Admi
General - Pharmacy Benefit Administration Revenue (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Minimum | |
Operating results by business segment | |
Anticipated period of benefit of the material right | 2 years |
Maximum | |
Operating results by business segment | |
Anticipated period of benefit of the material right | 10 years |
General - Formulary Management
General - Formulary Management Revenue (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Minimum | |
Operating results by business segment | |
Term of formulary management contract | 1 year |
General - Accounts Receivable,
General - Accounts Receivable, Contract Assets and Contract Liabilities - Tabular Disclosure (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Summary of Significant Accounting Policies | ||
Accounts receivable | $ 824,067 | $ 799,803 |
Change in accounts receivable | $ 24,264 | |
Change in accounts receivable (as a percent) | 3.00% | |
Contract assets | $ 4,678 | 3,566 |
Change in contract assets | $ (1,112) | |
Change in contract assets (as a percent) | 31.20% | |
Contract liabilities - current | $ 6,968 | 6,772 |
Change in contract liabilities - current | $ 196 | |
Change in contract liabilities - current (as a percent) | 2.90% | |
Contract liabilities - long-term | $ 11,453 | $ 11,073 |
Change in contract liabilities - long-term | $ 380 | |
Change in contract liabilities - long-term (as a percent) | 3.40% |
General - Accounts Receivable_2
General - Accounts Receivable, Contract Assets and Contract Liabilities - Additional Information (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Contract liabilities | |
Revenue recognized previously included in current contract liabilities | $ 2 |
General - Accounts Receivable_3
General - Accounts Receivable, Contract Assets and Contract Liabilities - Performance Obligation (Details) $ in Millions | Mar. 31, 2021USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01 | |
Performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 9 months |
Estimated revenue to be recognized | $ 6 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 12 months |
Estimated revenue to be recognized | $ 4 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 12 months |
Estimated revenue to be recognized | $ 3.6 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 0 months |
Estimated revenue to be recognized | $ 4.8 |
General - Customers Exceeding T
General - Customers Exceeding Ten Percent of Consolidated Net Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Significant customers | ||
Revenue from Contract with Customer, Including Assessed Tax | $ 1,161,649 | $ 1,122,379 |
MCC Business | Discontinued Operations, Held-for-sale | ||
Significant customers | ||
Managed care and other revenue | $ 720,034 | |
Maximum | ||
Significant customers | ||
Term of contracts with customers | 3 years | |
Term of contract extensions or renewals | 2 years |
General - Customers Exceeding_2
General - Customers Exceeding Ten Percent of Segment Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Significant customers | ||
Revenues | $ 1,161,649 | $ 1,122,379 |
Healthcare | ||
Significant customers | ||
Revenues | 533,010 | 488,906 |
Healthcare | Customer A | ||
Significant customers | ||
Revenues | 92,982 | 88,539 |
Healthcare | Customer B | ||
Significant customers | ||
Revenues | 55,486 | 49,438 |
Pharmacy Management | ||
Significant customers | ||
Revenues | 632,199 | 638,213 |
Pharmacy Management | Customer C | ||
Significant customers | ||
Revenues | $ 88,651 | $ 98,617 |
General - Concentration of Busi
General - Concentration of Business (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Significant customers | |||
Net revenue | $ 1,161,649 | $ 1,122,379 | |
Accounts receivable, net | $ 793,504 | $ 743,502 | |
Minimum | |||
Significant customers | |||
Term of contracts with customers | 1 year | ||
Term of contract extensions or renewals | 1 year | ||
Notice period for termination of contract | 30 days | ||
Maximum | |||
Significant customers | |||
Term of contracts with customers | 3 years | ||
Term of contract extensions or renewals | 2 years | ||
Notice period for termination of contract | 180 days | ||
Pennsylvania Counties | |||
Significant customers | |||
Net revenue | $ 152,700 | 137,000 | |
CMS | |||
Significant customers | |||
Net revenue | 200 | 55,700 | |
Accounts receivable, net | 55,200 | $ 69,600 | |
United States federal government | |||
Significant customers | |||
Net revenue | $ 77,700 | $ 69,900 |
General - Leases - General Info
General - Leases - General Information (Details) | 3 Months Ended |
Mar. 31, 2021lease | |
Leases | |
Initial term | 12 months |
Renewal terms | true |
Minimum | |
Leases | |
Options to renew | 1 |
Options to extend the lease renewal terms | 1 year |
Maximum | |
Leases | |
Options to extend the lease renewal terms | 10 years |
General - Leases - Lease Expens
General - Leases - Lease Expenses (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Components of leases expenses: | |
Operating lease cost | $ 2,408 |
Amortization of right-of-use asset | 707 |
Interest on lease liabilities | 166 |
Total finance lease cost | 873 |
Short-term lease cost | 40 |
Variable lease cost | 224 |
Total lease cost | 3,545 |
Sublease income | (7) |
Net lease cost | $ 3,538 |
General - Leases - Assets and L
General - Leases - Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Components of lease assets and liabilities | ||
Operating lease right-of-use assets | $ 32,053 | |
Operating Lease, Right-of-Use Asset, Statement of Financial Position | Other long-term assets | |
Current operating lease liabilities | $ 10,597 | |
Operating Lease, Liability, Current, Statement of Financial Position | Accrued liabilities | |
Long-term operating lease liabilities | $ 33,626 | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position | Deferred credits and other long-term liabilities | |
Total operating lease liabilities | $ 44,223 | |
Operating Lease, Liability, Statement of Financial Position | us-gaap:AccruedLiabilitiesCurrent us-gaap:DeferredCreditsAndOtherLiabilitiesNoncurrent | |
Finance lease assets | $ 12,183 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position | Property and equipment, net | |
Current finance lease liabilities | $ 4,455 | |
Finance Lease, Liability, Current, Statement of Financial Position | Current debt, finance lease and deferred financing obligations | |
Long-term finance lease liabilities | $ 10,783 | |
Finance Lease, Liability, Noncurrent, Statement of Financial Position | Long-term debt, finance lease and deferred financing obligations | |
Total finance lease liabilities | $ 15,238 | $ 16,400 |
Total lease liabilities | $ 59,461 |
General - Leases - Maturity Dat
General - Leases - Maturity Dates (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Leases | |
2020 | $ 11,819 |
2021 | 14,893 |
2022 | 12,399 |
2023 | 10,616 |
2024 | 5,358 |
2025 and beyond | 5,556 |
Total lease payments | $ 60,641 |
General - Leases - Gross Differ
General - Leases - Gross Difference (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Leases | |
Total lease payments | $ 60,641 |
Less interest | (1,180) |
Present value of lease liabilities | $ 59,461 |
General - Leases - Weighted Ave
General - Leases - Weighted Average Remaining Lease Term and Discount Rate (Details) | Mar. 31, 2021 |
Leases | |
Weighted average remaining lease term, operating leases | 4 years 11 months 23 days |
Weighted average remaining lease term, finance leases | 3 years 6 months 7 days |
Weighted average discount rate, operating leases | 3.18% |
Weighted average discount rate, finance leases | 4.40% |
General - Leases - Supplemental
General - Leases - Supplemental Cash Flow Information (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Leases | |
Operating cash flows from operating leases | $ 4,661 |
Operating cash flows from finance leases | 1,121 |
Financing cash flows from finance leases | $ 166 |
General - Fair Value Measuremen
General - Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Investments | $ 630,430 | $ 143,459 |
Cash held in bank accounts | 8,700 | 464,900 |
U.S. Government and agency securities | ||
Assets | ||
Investments | 332,403 | 42,399 |
Corporate debt securities | ||
Assets | ||
Investments | 296,716 | 99,749 |
Certificates of deposit | ||
Assets | ||
Investments | 1,311 | 1,311 |
Level 1 | 4.400% Senior Notes due 2024 | ||
Liabilities | ||
Long-term Debt, Fair Value | 387,400 | |
Level 2 | 2017 Credit Agreement, senior unsecured term loan facility | ||
Liabilities | ||
Long-term Debt, Fair Value | 158,800 | |
Fair Value, Recurring | ||
Assets | ||
Total assets held at fair value | 1,078,057 | 823,013 |
Fair Value, Recurring | Other Than Cash In Entity Bank Accounts Member | ||
Assets | ||
Cash and cash equivalents | 447,627 | 679,554 |
Fair Value, Recurring | U.S. Government and agency securities | ||
Assets | ||
Investments | 332,403 | 42,399 |
Fair Value, Recurring | Corporate debt securities | ||
Assets | ||
Investments | 296,716 | 99,749 |
Fair Value, Recurring | Certificates of deposit | ||
Assets | ||
Investments | 1,311 | 1,311 |
Fair Value, Recurring | Level 1 | ||
Assets | ||
Total assets held at fair value | 332,403 | 42,399 |
Fair Value, Recurring | Level 1 | U.S. Government and agency securities | ||
Assets | ||
Investments | 332,403 | 42,399 |
Fair Value, Recurring | Level 2 | ||
Assets | ||
Total assets held at fair value | 745,654 | 780,614 |
Fair Value, Recurring | Level 2 | Other Than Cash In Entity Bank Accounts Member | ||
Assets | ||
Cash and cash equivalents | 447,627 | 679,554 |
Fair Value, Recurring | Level 2 | Corporate debt securities | ||
Assets | ||
Investments | 296,716 | 99,749 |
Fair Value, Recurring | Level 2 | Certificates of deposit | ||
Assets | ||
Investments | $ 1,311 | $ 1,311 |
General - Cash And Cash Equival
General - Cash And Cash Equivalents (Details) $ in Millions | Mar. 31, 2021USD ($) |
Cash and Cash Equivalents | |
Book overdrafts | $ 2.1 |
Excess capital and undistributed earnings for regulated subsidiaries included in cash and cash equivalents | $ 50 |
General - Investments - Realize
General - Investments - Realized Gains or Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Realized gains or losses | ||||
Realized gains or losses | $ 0 | $ 0 | $ 0 | $ 0 |
General - Investments - Amortiz
General - Investments - Amortized Cost (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Amortized cost | ||
Amortized Cost | $ 630,519 | $ 143,561 |
Gross Unrealized Gains | 43 | 14 |
Gross Unrealized Losses | (132) | (116) |
Estimated Fair Value | 630,430 | 143,459 |
U.S. Government and agency securities | ||
Amortized cost | ||
Amortized Cost | 332,375 | 42,389 |
Gross Unrealized Gains | 29 | 11 |
Gross Unrealized Losses | (1) | (1) |
Estimated Fair Value | 332,403 | 42,399 |
Corporate debt securities | ||
Amortized cost | ||
Amortized Cost | 296,833 | 99,861 |
Gross Unrealized Gains | 14 | 3 |
Gross Unrealized Losses | (131) | (115) |
Estimated Fair Value | 296,716 | 99,749 |
Certificates of deposit | ||
Amortized cost | ||
Amortized Cost | 1,311 | 1,311 |
Estimated Fair Value | $ 1,311 | $ 1,311 |
General - Investments by Maturi
General - Investments by Maturity Date (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Amortized Cost | ||
2020 | $ 625,439 | |
2021 | 5,080 | |
Amortized Cost | 630,519 | $ 143,561 |
Estimated Fair Value | ||
2020 | 625,350 | |
2021 | 5,080 | |
Estimated Fair Value | $ 630,430 | $ 143,459 |
General - Income Taxes - Effect
General - Income Taxes - Effective Income Tax Rates (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Taxes | ||
Effective income tax rates (as a percent) | 27.70% | 122.80% |
General - Net Operating Loss Ca
General - Net Operating Loss Carryforwards (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Operating loss carryforwards | ||
Deferred tax assets | $ 0.9 | $ 0.9 |
State and Local | ||
Operating loss carryforwards | ||
Operating Loss Carryforwards | $ 75 |
General - Health Care Reform (D
General - Health Care Reform (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Summary of Significant Accounting Policies | |
HIF fees | $ 36.2 |
HIF fees, continuing operations | $ 12.4 |
General - Stock Compensation -
General - Stock Compensation - Stock Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Mar. 31, 2021 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock Compensation | ||||||
Stock compensation expense | $ 7.1 | |||||
Benefits of tax deductions (tax on deficiencies) in excess of recognized stock compensation expense | $ 1.1 | $ 1.4 | ||||
Minimum | ||||||
Stock Compensation | ||||||
Estimated forfeitures (as a percent) | 0.00% | 0.00% | 0.00% | 0.00% | ||
Maximum | ||||||
Stock Compensation | ||||||
Estimated forfeitures (as a percent) | 4.00% | 4.00% | 4.00% | 4.00% |
General - Stock Compensation _2
General - Stock Compensation - Options - Benefit of Tax (Tax on Deficiencies) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Stock Compensation | ||
Benefits of tax deductions (tax on deficiencies) in excess of recognized stock compensation expense | $ 1.1 | $ 1.4 |
General - Stock Compensation _3
General - Stock Compensation - Options - Activity (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Options | |
Outstanding, beginning of period (in shares) | shares | 1,045,283 |
Forfeited (in shares) | shares | (19,960) |
Exercised (in shares) | shares | (109,381) |
Outstanding, end of period (in shares) | shares | 915,942 |
Weighted Average Exercise Price | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 75.48 |
Forfeited (in dollars per share) | $ / shares | 89.13 |
Exercised (in dollars per share) | $ / shares | 68.26 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 76.05 |
Vested and Expected to Vest | |
Vested and expected to vest end of period (in shares) | shares | 914,068 |
Vested and expected to vest end of period (in dollars per share) | $ / shares | $ 76.07 |
Exercisable, end of period (in shares) | shares | 816,244 |
Exercisable, end of period (in dollars per share) | $ / shares | $ 77.24 |
General - Stock Compensation _4
General - Stock Compensation - Nonvested - Activity (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Restricted Stock Awards | |
Shares | |
Outstanding, beginning of period (in shares) | shares | 54,314 |
Outstanding, end of period (in shares) | shares | 54,314 |
Weighted Average Grant Date Fair Value | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 77.33 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 77.33 |
Restricted Stock Units (RSUs) | |
Shares | |
Outstanding, beginning of period (in shares) | shares | 428,362 |
Awarded (in shares) | shares | 275,619 |
Vested (in shares) | shares | (148,546) |
Forfeited (in shares) | shares | (887) |
Outstanding, end of period (in shares) | shares | 554,548 |
Weighted Average Grant Date Fair Value | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 65.83 |
Awarded (in dollars per share) | $ / shares | 92.85 |
Vested (in dollars per share) | $ / shares | 67.77 |
Forfeited (in dollars per share) | $ / shares | 70.40 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 78.73 |
Performance Based Restricted Stock Units ("PSUs") | |
Shares | |
Outstanding, beginning of period (in shares) | shares | 278,945 |
Forfeited (in shares) | shares | (63,324) |
Outstanding, end of period (in shares) | shares | 215,621 |
Weighted Average Grant Date Fair Value | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 99.80 |
Forfeited (in dollars per share) | $ / shares | 141.61 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 87.51 |
General - Stock Compensation _5
General - Stock Compensation - Restricted Stock Units (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Restricted Stock Units (RSUs) | |
Stock Compensation | |
Vesting period | 3 years |
General - Goodwill (Details)
General - Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Summary of Significant Accounting Policies | ||
Goodwill | $ 873,830 | $ 873,779 |
General - Long-Term Debt, Finan
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Tabular Disclosure (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Debt and finance lease obligations | ||
Senior Notes | $ 359,656 | $ 359,632 |
Term loan | 158,750 | 263,125 |
Other loan | 2,154 | 2,154 |
Finance leases | 15,238 | 16,400 |
Deferred loan costs | (3,861) | (4,192) |
Total debt and finance lease obligations | 533,225 | 638,376 |
Land and equipment | ||
Debt and finance lease obligations | ||
Finance leases | 15,238 | 16,359 |
Software as a service | ||
Debt and finance lease obligations | ||
Finance leases | $ 1,288 | $ 1,298 |
General - Long-Term Debt, Fin_2
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Senior Notes (Details) - Senior Notes - 4.400% Senior Notes due 2024 - USD ($) $ in Millions | Sep. 22, 2017 | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 |
Debt | ||||
Debt instrument, face amount | $ 400 | |||
Stated interest rate (as a percent) | 4.40% | |||
Debt instrument, repurchased face amount | $ 40 | $ 28.9 | ||
Gain (loss) on repurchase of debt instrument | $ 0.7 | |||
Long-term debt | $ 359.7 | $ 359.6 | ||
Interest rate during the period (as a percent) | 4.90% | |||
Debt instrument, maturity date | Sep. 22, 2024 | |||
Redemption price of the principal amount redeemed (as a percent) | 100.00% |
General - Long-Term Debt, Fin_3
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Credit Agreement - General Information (Details) - Unsecured Debt - USD ($) $ in Millions | Sep. 22, 2017 | Mar. 31, 2020 | Mar. 31, 2021 | Dec. 31, 2020 |
2017 Credit Agreement | ||||
Debt | ||||
Voluntary term loan repayments | $ 100 | |||
Debt instrument, maturity date | Sep. 22, 2023 | |||
Borrowings outstanding | $ 158.8 | $ 263.1 | ||
2017 Credit Agreement | Federal Funds Rate | ||||
Debt | ||||
Basis spread on variable rate (as a percent) | 0.50% | |||
2017 Credit Agreement, senior unsecured revolving credit facility | ||||
Debt | ||||
Maximum borrowing capacity | $ 400 | |||
Basis spread on variable rate (as a percent) | 1.75% | |||
Weighted average interest rate (as a percent) | 2.01% | |||
Interest rate (as a percent) | 1.86% | |||
Borrowings outstanding | $ 0 | $ 0 | ||
2017 Credit Agreement, senior unsecured revolving credit facility | Prime rate | ||||
Debt | ||||
Basis spread on variable rate (as a percent) | 0.50% | |||
2017 Credit Agreement, senior unsecured revolving credit facility | Eurodollar rate for one month | ||||
Debt | ||||
Basis spread on variable rate (as a percent) | 1.00% | |||
2017 Credit Agreement, senior unsecured revolving credit facility | Eurodollar rate for selected interest period | ||||
Debt | ||||
Basis spread on variable rate (as a percent) | 1.50% | |||
2017 Credit Agreement, senior unsecured term loan facility | ||||
Debt | ||||
Maximum borrowing capacity | $ 350 |
General - Long-Term Debt, Fin_4
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Credit Agreement - Contractual Maturities (Details) - Unsecured Debt $ in Millions | Mar. 31, 2021USD ($) |
Long-term Debt, Fiscal Year Maturity | |
2022 | $ 158.8 |
2017 Credit Agreement | |
Long-term Debt, Fiscal Year Maturity | |
2020 | 0 |
2022 | 0 |
Long-term debt | $ 158.8 |
General - Long-Term Debt, Fin_5
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Credit Agreement - Additional Information (Details) - Unsecured Debt - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
2017 Credit Agreement | ||
Debt | ||
Borrowings outstanding | $ 158.8 | $ 263.1 |
2017 Credit Agreement, senior unsecured revolving credit facility | ||
Debt | ||
Borrowings outstanding | 0 | 0 |
Available borrowing capacity | 400 | 400 |
Deferred loan issuance cost | $ 3.9 | $ 4.2 |
General - Long-Term Debt, Fin_6
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Letter of Credit Agreement (Details) - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Long Term Debt, Capital Lease and Deferred Financing Obligations | ||
Letters of credit outstanding | $ 33 | $ 32.1 |
General - Long-Term Debt, Fin_7
General - Long-Term Debt, Finance Lease and Deferred Financing Obligations - Finance Lease (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Leases | ||
Finance lease liability | $ 15,238 | $ 16,400 |
Gross cost of finance leased assets | $ 43,000 | $ 43,000 |
General - Redeemable Non contro
General - Redeemable Non controlling Interest (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Temporary Equity [Line Items] | ||
Redeemable Noncontrolling Interest, Equity, Carrying Amount | $ 33,303 | $ 33,062 |
Aurelia Health, LLC | ||
Temporary Equity [Line Items] | ||
Noncontrolling Interest, Ownership Percentage by Parent | 70.00% | |
Threshold percentage of the remaining shares to be purchased on exercise the right to put options | 33.30% | |
Period from the redemption date | 30 days | |
Percentage of the remaining shares that can be purchased by the company under the call option | 33.30% | |
Period of EBITDA at the redemption date of redeemable non-controlling interest, used in the calculation of redemption price for put and call option | 12 months | |
Redeemable Noncontrolling Interest, Equity, Carrying Amount | $ 33,300 | $ 33,100 |
Net Income per Common Share A_3
Net Income per Common Share Attributable to Magellan Health, Inc. - Tabular Disclosure (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Numerator: | ||
Net income (loss) from continuing operations | $ 28,509 | $ (1,070) |
Income from discontinued operations, net of tax | (682) | 19,320 |
Net income | 27,827 | 18,250 |
Net income available to common stockholders, basic | $ 27,827 | $ 18,250 |
Denominator: | ||
Weighted average number of common shares outstanding-basic (in shares) | 25,948 | 24,728 |
Weighted average number of common shares outstanding-diluted (in shares) | 26,553 | 24,869 |
Net income per common share - basic: | ||
Continuing operations (in dollars per share) | $ 1.10 | $ (0.04) |
Discontinued operations (in dollars per share) | (0.03) | 0.78 |
Consolidated operations (in dollars per share) | 1.07 | 0.74 |
Net income per common share - diluted: | ||
Continuing operations (in dollars per share) | 1.07 | (0.04) |
Discontinued operations (in dollars per share) | (0.03) | 0.78 |
Consolidated operations (in dollars per share) | $ 1.04 | $ 0.74 |
Stock Options | ||
Denominator: | ||
Common stock equivalents (in shares) | 186 | 61 |
Restricted Stock Awards | ||
Denominator: | ||
Common stock equivalents (in shares) | 19 | 21 |
Restricted Stock Units (RSUs) | ||
Denominator: | ||
Common stock equivalents (in shares) | 196 | 50 |
Performance Based Restricted Stock Units ("PSUs") | ||
Denominator: | ||
Common stock equivalents (in shares) | 201 | |
Employee Stock | ||
Denominator: | ||
Common stock equivalents (in shares) | 3 | 9 |
Net Income per Common Share A_4
Net Income per Common Share Attributable to Magellan Health, Inc. - Antidilutive Securities (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net Income per Common Share Attributable to Magellan Health, Inc. | ||
Potential dilutive securities excluded from computation of dilutive securities (in shares) | 0.3 | 1.4 |
Business Segment Information -
Business Segment Information - Operating Results by Business Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating results by business segment | ||
Net revenue | $ 1,161,649 | $ 1,122,379 |
Cost of care | (379,191) | (349,108) |
Cost of goods sold | (492,370) | (533,241) |
Direct service costs and other | (231,021) | (204,241) |
Legal matter settlement | 9,000 | |
Stock compensation expense | 7,057 | 5,797 |
Segment Profit (Loss) | 75,124 | 41,586 |
Managed care and other | ||
Operating results by business segment | ||
Net revenue | 626,076 | 553,168 |
PBM | ||
Operating results by business segment | ||
Net revenue | 535,573 | 569,211 |
Healthcare | ||
Operating results by business segment | ||
Net revenue | 533,010 | 488,906 |
Pharmacy Management | ||
Operating results by business segment | ||
Net revenue | 632,199 | 638,213 |
Operating Segments | Healthcare | ||
Operating results by business segment | ||
Cost of care | (379,191) | (349,108) |
Direct service costs and other | (114,993) | (105,936) |
Stock compensation expense | 2,519 | 1,761 |
Segment Profit (Loss) | 41,345 | 35,623 |
Operating Segments | Healthcare | Managed care and other | ||
Operating results by business segment | ||
Net revenue | 533,010 | 488,906 |
Operating Segments | Pharmacy Management | ||
Operating results by business segment | ||
Cost of goods sold | (495,593) | (537,574) |
Direct service costs and other | (104,596) | (81,866) |
Legal matter settlement | 9,000 | |
Stock compensation expense | 2,696 | 2,107 |
Segment Profit (Loss) | 43,706 | 20,880 |
Operating Segments | Pharmacy Management | Managed care and other | ||
Operating results by business segment | ||
Net revenue | 93,227 | 64,435 |
Operating Segments | Pharmacy Management | PBM | ||
Operating results by business segment | ||
Net revenue | 538,972 | 573,778 |
Corporate and Eliminations | ||
Operating results by business segment | ||
Cost of goods sold | 3,223 | 4,333 |
Direct service costs and other | (11,432) | (16,439) |
Stock compensation expense | 1,842 | 1,929 |
Segment Profit (Loss) | (9,927) | (14,917) |
Corporate and Eliminations | Managed care and other | ||
Operating results by business segment | ||
Net revenue | (161) | (173) |
Corporate and Eliminations | PBM | ||
Operating results by business segment | ||
Net revenue | $ (3,399) | $ (4,567) |
Business Segment Information _2
Business Segment Information - Reconciliation of Segment Profit to Income Before Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Reconciliation of segment profit to income before income taxes | ||
Income (loss) from continuing operations before income taxes | $ 39,414 | $ 4,692 |
Stock compensation expense | 7,057 | 5,797 |
Depreciation and amortization | 21,417 | 23,358 |
Interest expense | 6,426 | 8,958 |
Interest and other income | (341) | (1,219) |
Special charges | 1,151 | |
Segment Profit (Loss) | $ 75,124 | $ 41,586 |
Commitments and Contingencies -
Commitments and Contingencies - Regulatory Issues (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
AFSC | ||
Acquisitions | ||
Percentage of total revenues attributable to subsidiary | 2.40% | 2.40% |
Commitments and Contingencies_2
Commitments and Contingencies - Stock Repurchases - General Information (Details) - October 2015 Share Repurchase Program - USD ($) $ in Millions | Mar. 31, 2021 | Oct. 26, 2015 |
Equity, Class of Treasury Stock [Line Items] | ||
Amount authorized under stock repurchase plan | $ 400 | |
Remaining authorized repurchase amount | $ 186.3 |
Commitments and Contingencies_3
Commitments and Contingencies - Stock Repurchases - Tabular Disclosure (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 2 Months Ended | 12 Months Ended | 65 Months Ended | |||
Oct. 31, 2020 | Dec. 31, 2015 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2021 | |
Stockholders' Equity | |||||||
Share repurchases made in open market (in shares) | 0 | 345,044 | 60,901 | 844,872 | 280,140 | 1,828,183 | 3,359,140 |
Average Price Paid per Share (in dollars per share) | $ 53.46 | $ 61.15 | $ 74.59 | $ 77.67 | $ 58.40 | ||
Aggregate Cost | $ 18.4 | $ 3.7 | $ 63 | $ 21.8 | $ 106.8 | $ 213.7 |
Acquisitions - General Informat
Acquisitions - General Information (Details) - Aurelia Health, LLC - USD ($) $ in Millions | Dec. 21, 2021 | Mar. 31, 2021 |
Date of Acquisition | ||
Business Acquisition, Date of Acquisition Agreement | Dec. 18, 2020 | |
Business Acquisition, Effective Date of Acquisition | Dec. 21, 2020 | |
Description | ||
Percentage of equity interest acquired (as a percent) | 70.00% | |
Consideration Transferred | ||
Base purchase price | $ 78.4 | |
Measurement period adjustments, increase in goodwill | $ 0.1 |
Discontinued Operations - Gener
Discontinued Operations - General Information (Details) - MCC Business - Discontinued Operations, Disposed of by Sale - USD ($) $ in Millions | Mar. 31, 2021 | Dec. 31, 2020 |
Discontinued Operations | ||
Disposal Group, Including Discontinued Operation, Consideration | $ 850 | $ 850 |
Disposal Group, Including Discontinued Operation, Consideration, Closing Adjustments | $ 158 | $ 158 |
Discontinued Operations - Compo
Discontinued Operations - Components of Income from Discontinued Operations - Tabular Disclosure (Details) - MCC Business - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Discontinued Operations, Disposed of by Sale | ||
Discontinued Operations | ||
Direct service costs and other operating expenses | $ 926 | |
Total costs and expenses | 926 | |
Income (loss) from discontinued operation before income taxes | (926) | |
Provision (benefit) for income taxes | (244) | |
Net income (loss) from discontinued operations | $ (682) | |
Discontinued Operations, Held-for-sale | ||
Discontinued Operations | ||
Managed care and other revenue | $ 720,034 | |
Cost of care | 602,534 | |
Direct service costs and other operating expenses | 84,497 | |
Depreciation and amortization | 5,326 | |
Interest expense | 71 | |
Interest and other income | (2,540) | |
Total costs and expenses | 689,888 | |
Income (loss) from discontinued operation before income taxes | 30,146 | |
Provision (benefit) for income taxes | 10,826 | |
Net income (loss) from discontinued operations | $ 19,320 |
Discontinued Operations - Com_2
Discontinued Operations - Components of Income from Discontinued Operations - Additional Information (Details) - MCC Business - Discontinued Operations, Held-for-sale - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Discontinued Operations | ||
Stock compensation expense | $ 260 | |
Overhead expenses previously allocated | $ 6,700 | |
Divestiture related expenses | $ 605 |
Special Charges - General Infor
Special Charges - General Information (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Restructuring Charges | |
Restructuring charges | $ (126) |
Asset Impairment Charges | |
Impairment | 1,277 |
Employee severance and termination benefits | |
Restructuring Charges | |
Restructuring charges | (209) |
Lease shutdown costs | |
Restructuring Charges | |
Restructuring charges | 83 |
Transformation Initiative, 2020 | |
Asset Impairment Charges | |
Impairment | 1,300 |
Transformation Initiative, 2020 | Employee severance and termination benefits | |
Restructuring Charges | |
Restructuring charges | 200 |
Transformation Initiative, 2020 | Lease shutdown costs | |
Restructuring Charges | |
Restructuring charges | $ 100 |
Special Charges - Components (D
Special Charges - Components (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Non-cash related special charges | |
Right-of-use assets | $ 1,263 |
Fixed assets | 14 |
Total non-cash related special charges | 1,277 |
Cash related special charges | |
Restructuring charges | (126) |
Total special charges | 1,151 |
Employee severance and termination benefits | |
Cash related special charges | |
Restructuring charges | (209) |
Lease shutdown costs | |
Cash related special charges | |
Restructuring charges | $ 83 |
Special Charges - Roll Forward
Special Charges - Roll Forward (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Special charges | |
Beginning balance | $ 11,593 |
Additions | (126) |
Payments | (1,102) |
Ending balance | 10,365 |
Employee severance and termination benefits | |
Special charges | |
Beginning balance | 10,983 |
Additions | (209) |
Payments | (1,019) |
Ending balance | 9,755 |
Lease shutdown costs | |
Special charges | |
Beginning balance | 610 |
Additions | 83 |
Payments | (83) |
Ending balance | $ 610 |