In recent months, state governors across the U.S. have been putting behavioral health at the forefront of their healthcare agendas. The increasing recognition of behavioral health Medicaid services challenges, particularly for Medicaid enrollees, has emerged as a critical issue for state leaders. This heightened focus on behavioral health Medicaid services is not only an important development for the overall healthcare system but also represents a significant growth opportunity for Centene Corp. (NYSE: CNC), particularly in its dealings with state Medicaid programs.
Ken Fasola, Centene’s president, and Sarah London, Centene’s CEO, have engaged in meetings with more than 30 governors over the last six months, with behavioral health consistently being identified as one of the “top 3” healthcare priorities for these states. During these discussions, the governors have shared concerns and challenges related to behavioral health services, ranging from staffing shortages to limited access to services and the need for better broadband infrastructure to support the expansion of telehealth services. This dialogue with state officials presents a growing opportunity for Centene, which has already established a significant presence in behavioral health Medicaid services.
The Growing Importance of Behavioral Health for Medicaid Enrollees
Medicaid, as a public insurance program serving low-income individuals, has long been a crucial part of the U.S. healthcare system. With behavioral health issues becoming more prevalent across all demographic groups, Medicaid enrollees are often more likely to face challenges related to mental health and substance use. Governors are increasingly recognizing the importance of providing adequate behavioral health Medicaid services to this vulnerable population, which has led to a series of initiatives aimed at enhancing access and improving the quality of behavioral health services for Medicaid recipients.
According to Sarah London, the governors’ focus on expanding behavioral health Medicaid services for Medicaid members is creating “nice tailwinds” for Centene’s business. These discussions have centered on the need for a more integrated approach to physical and mental health, with the goal of providing more comprehensive care for Medicaid enrollees. Centene’s existing operations and expertise in managing Medicaid benefits position the company as a key player in helping state governments address these challenges.
Centene’s Strategic Move: Integrating Behavioral Health through Magellan Health
Centene’s acquisition of Magellan Health in January 2022 marked a pivotal moment in the company’s strategy to strengthen its position in the behavioral health Medicaid services space. Magellan Health is a specialty managed care organization that has expertise in behavioral health and offers a range of services, including mental health and substance use disorder treatment. By integrating Magellan Health’s behavioral health management capabilities into Centene’s core Medicaid managed care business, Centene has been able to provide a more holistic approach to healthcare, one that incorporates both physical and behavioral health.
This integration is particularly important as state governments push for better behavioral health Medicaid services for Medicaid enrollees. Through its Magellan Health acquisition, Centene has been able to create new, population-specific programs and strategies that cater to the unique needs of Medicaid members. This enables Centene to provide not only better care but also more tailored solutions for individuals struggling with mental health or substance use issues, which are increasingly prevalent among Medicaid populations.
Challenges in Behavioral Health: Rising Utilization and Cost Concerns
While Centene has been able to integrate behavioral health Medicaid services into its Medicaid offerings with relative success, the issue of rising utilization remains a concern for the company. Behavioral health services, particularly those related to substance use and opioid use disorder, continue to see increased demand, a trend that has put pressure on healthcare providers across the industry. Centene’s leadership has acknowledged this trend, with CFO Drew Asher noting during the company’s first-quarter earnings call that behavioral health Medicaid services costs had risen slightly year-over-year, driven primarily by increased demand for substance abuse treatment.
Despite these rising costs, London downplayed behavioral health as a significant driver of overall medical costs for Centene. While behavioral health Medicaid services utilization is still a key component of the company’s underlying healthcare utilization, London stated that it is not creating as much financial pressure as was seen in the past. However, the company is continuing to monitor the situation closely, especially in light of broader industry trends that suggest behavioral health Medicaid services utilization is rising across the board.
The Impact of Telehealth on Behavioral Health Access
One of the major themes discussed in Centene’s meetings with governors is the role of telehealth in improving access to behavioral health Medicaid services. Many state leaders have recognized that telehealth can play a pivotal role in expanding access to care, especially in rural or underserved areas where behavioral health providers may be in short supply. The increased use of telehealth for mental health and substance use disorder treatment has the potential to reduce barriers to care, allowing Medicaid enrollees to receive treatment more conveniently and affordably.
In response to this growing demand for telehealth services, Centene has continued to expand its telehealth capabilities, working behind the scenes to ensure that its offerings are aligned with the evolving needs of state Medicaid programs. By incorporating telehealth into its Medicaid behavioral health integration, Centene is able to provide more flexible and accessible care to Medicaid recipients, which aligns with the goals of state governors to improve healthcare outcomes for their populations.
