Aetna's $5.7-billion purchase of Coventry Health Care, a huge provider of Medicare and Medicaid programs, is just the latest example of health care dealmaking in advance of the election. Last month, WellPoint agreed to acquire Amerigroup for $5 billion, and before that Cigna paid $3.8 billion for HealthSpring, another company focused on Medicaid and Medicare. Lining up these acquisitions suggests that the health care world expects the president to remain in office. Even if he loses, the Affordable Care Act may be difficult to repeal, as Romney says he would do. From NYT columnist Andrew Ross Sorkin:
[Aetna CEO Mark] Bertolini of Aetna insisted on Monday that the deal was not dependent on who wins the White House. But he has to say that. If he believed Mr. Romney was going to win and he still wanted to buy Coventry, he would have waited until after the election and bought it at a sharp discount. In a note to investors on Monday about Aetna's Coventry deal, an analyst at Barclays explained the rationale of it plainly as a way of "strategically positioning themselves to capitalize on further gains which may arise as a result of the election and health care reform."
Companies like Aetna, WellPoint and Cigna have all gravitated to rivals with a foothold in government-sponsored programs because the prevailing view is that margins for private customers are going to steadily erode. According to Aetna on Monday, the acquisition of Coventry will "substantially increase Aetna's Medicaid footprint, creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity positions as they move into managed care." Aetna's revenue from the government will jump to 30 percent from 23 percent.