Chasing greater profits, ‘activist investor’ Politan Capital Management drives Centene international business divestment review

  • An “activist investment firm”, Politan Capital Management, recently took a stake in the huge US health insurer, Centene Corporation, and is now driving it towards international divestment plans, as part of a move to increase profits by refocusing on the company’s “core activities” in the USA.
  • This will almost certainly be of interest in the upcoming Judicial Review of Centene Corporation’s take-over last winter of dozens of London GP Surgeries, via its UK subsidiaries MH Services International Holdings (UK) and Operose Health Ltd.
  • The Judicial Review on February 1st and 2nd will ask the London High Courts to quash the decision by North Central London Clinical Commissioning Group to approve the Centene takeover.
  • The Court will rule whether, in making their decision, the NHS Commissioners acted unlawfully in three respects – including failure to give due consideration to the risk to patients, if the GP contracts it agreed to transfer to Operose Health turned out not to meet its parent company Centene’s profitability targets.

This risk has come into sharp focus as “activist investment firm” Politan Capital Management has forced a review of Centene’s international business, with a view to divestment


Politan Capital Management, with a roughly $900 million stake in Centene which is valued at $46 billion, has also forced the creation of a new Centene Board as long term Chairman and Chief Executive, Michael Neidorff, prepares to retire.

Forbes reported,

“One of Politan’s concerns was Centene had lower margins than its peer health insurers while its board had several long-time members and needed fresh perspective.”

CNBC clarified that Politan’s aim is to double Centene’s profit margins on its various government-funded and commercial US health insurance schemes, through cost-cutting centralisation of the operations of its many subsidiaries.

News surfaced in December 2021 that in pursuit of increased profit margins, the “activist investor” is driving a Centene ‘stage one review’ of “non-core activities”, with a view to divestment in pursuit of increased profits for the corporation.

A “stage one” review of Centene’s non-core activities is exploring options to sell the corporation’s international businesses, Circle Health in the UK and Ribera Salud in Spain

In December 2021, Centene announced it was

“reviewing its non-core assets as part of its ongoing portfolio optimization processes, including evaluating strategic alternatives for its international business.”

According to Healthcare Dive, the stage one review of Centene’s international business covers Circle Health in the UK and Ribera Salud in Spain.

In the summer of 2021, Centene acquired 100% ownership of Circle Health Holdings Ltd in the UK, via the Centene UK subsidiary MH Services International UK, an “investment holding company” whose immediate parent company is MH Services International (Holdings) UK.

Circle Health Holdings Ltd records show the Centene subsidiary took control of Circle Health Holdings Ltd on 1 July 2021.

There is as yet no mention from Centene Corporation if other MH Services International (Holdings) UK subsidiaries, apart from Circle Health, may be up for divestment.

The goal of Centene’s review of its “non-core assets”, including an “evaluation of strategic alternatives for its international business” is to significantly increase its “diluted earnings per share” in 2022. This profitability calculation measures the amount of income that is available to the current common shareholders of the company.

Centene’s target is to increase this by around 50% on the 2021 figure.

Will the “profitability” of the London AT Medics Ltd GP practices taken over by Centene’s UK subsidiary Operose Health meet Politan Capital Management’s/ Centene Corporation’s increased profitability target?

Since 10th February 2021 Centene’s UK subsidiaries MH Services International (UK) Limited and Operose Health Limited have had 100% control of AT Medics Holdings LLP group of companies, which includes AT Medics Ltd, the GP practices company with multiple contracts across London.

As already noted, the ultimate UK parent company of Centene UK subsidiaries is MH Services International Holdings (UK).

As news broke of the Centene takeover of AT Medics Ltd, the GPs’ patients, as well as members of the general public and local Councillors and MPs, were alarmed to find a statement in MH Services International Holdings (UK) 2019 Public Accounts that clearly showed how the UK subsidiary is both dependent on Centene Corporation funding AND driven to maximise profits:

“Position at 31 December 2019 and future developments … Rationalisation of our business activities… has continued into 2020, as the business seeks to divest of activities that have not met profitability targets. As a result, on 31 March 2019, Operose Health Limited exited the Surrey Borders Partnership NHS Trust CAMHS contract…and on 1 July 2019, Operose Health (Group) UK Limited divested its complex care division, including the contracts and related assets.”

The 2020 report and accounts show MH Services International Holdings (UK) Ltd total comprehensive loss for 2020 was £19.097m, up from £15.39m in 2019.

In 2020 the company also had net current liabilities of £125.329m as of 31 Dec 2020 (compared to £44.497m in 2019) and net operating cash outflows for the year of £10.671m. (In 2019, this was £7.7m.)

“Ongoing concern” status of loss-making MH Services International Holdings (UK) Ltd depends on Centene’s continued financial support

As a result, MH Services International Holdings (UK) Ltd 2020 financial statements have only been prepared on an “ongoing concern basis” on the grounds that the company “has sufficient funds, through its parent [Centene] to meet its liabilities as they fall due during the forecast period.”

The Going Concern section admits that the £80.3m “new, on demand loans” provided to MH Services International Holdings (UK) Ltd by Centene Corporation, via its wholly-owned affiliate MHS Consulting International, Inc (MH Services International Holdings UK’s immediate parent entity), included operational cash needs for the Group as well as for the investment in Circle Health Holdings Ltd (Info source: Note 17 to Financial Statements for year ended 31 Dec 2020)

MH Services International Holdings (UK) 2020 report and accounts estimate that the Operose Health/MH Services International holdings (UK) acquisition of 100% of AT Medics Holdings LLP and its subsidiaries including AT Medics Ltd will increase MH Services International holdings (UK) future annual turnover by £57m. This is solely attributable to the provision of medical services.

AT Medics Ltd annual report and accounts to 31st March 2021 recorded an £8.603m profit for the year, up from £7.120m in 2019

Of AT Medics Ltd’s £8.603m profits as at March 31 2021, total investments by and distribution to owners (dividends paid and payable) amounted to £5.359m. (This included an asset transfer worth £854,421 to Primary Care Partners Ltd “by way of a Dividend in Specie”, ie a Dividend in kind. )

On an annual turnover of £57m, that looks like a profit rate of 9.4%?

Dividends paid and payable the previous year, 2019, amounted to £4.755m.

Most recent Circle Health Holdings Ltd accounts show increased operating loss and “senior debt” borrowing

Circle Health Holdings Ltd 2020 accounts are late and have not yet been filed at Companies House.

The 2019 accounts show an operating loss of £20.833m, compared to £11.935m in 2018. Exceptional costs in 2019 included £13.822m for the acquisition of BMI Healthcare and £766K legal costs in relation to a commercial dispute.

Since the balance sheet date at the end of December 2019, Circle Health Holdings Ltd says (Financial Statement Note 33) that the Circle Health Group took on debt to finance the acquisition of BMI Healthcare, to the tune of a new £198m loan, and new £50m capex (capital expenditure) facility. These come under a Senior Finance Agreement, which imposes specific covenants on the company. The debts are repayable between July 2026 and January 2027. In addition the Group acquired a £30m revolving credit facility to fund its working capital requirements.

In approving Operose Health’s takeover of AT Medics Ltd GP practices, did North Central London Clinical Commissioning Group consider the risk of activist investor-driven divestment of Centene’s international business, and what this could mean for AT Medics Ltd patients and staff?

It’s not as activist investor pressures are unheard of in private healthcare and life sciences companies with NHS contracts.

CK999 has already reported that in July 2021 Gatemore Capital Management, an “activist investor” in Sensyne Health, pressurised the company into dual listing on the NASDAQ exchange as well as on Aim, the London Stock Exchange’s junior market, where Sensyne shares remain below their float price. Sensyne Health has gone along with this and is reportedly

“exploring opportunities to drive growth to create additional shareholder value.”

These “opportunities” arose after Gatemoore Capital Management swooped in to buy a significant stake in Sensyne Health in early 2020, after the company’s shares plummeted 78 per cent from the company’s flotation on the London Stock Exchange’s junior AIM in August 2018.

Sensyne shareholders had sold in droves when they discovered £1 million of secret post-flotation ­executive bonuses had been paid in October 2019. £850K was paid to Lord Drayson and £200K to Lorrie Headley, Sensyne Health Chief Finance Officer.

Gatemore Capital Management LLC, registered in New York, is listed on Companies House as “a person with significant control” of Gatemore Capital Management.

What is a load of American shareholders going to mean for the 12.1m NHS patients in the UK whose confidential medical records Sensyne Health has access to via its 16 Strategic Research Agreements with NHS hospital trusts?

Info sources: Sensyne Health, NHS trusts own 16.2% of Sensyne shares, Software Products, Phenotypic data

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