2022 Engagement case study: engaging Centene on governance

Centene is a US-based managed care organisation that provides insurance and other services to government -healthcare programmes covering 26 million people in the US. This includes supporting Medicaid coverage for households on low incomes; providing coverage to the healthcare exchanges that were set up as part of the Affordable Care Act (also known as ‘Obamacare’); and health insurance products that support Medicare Advantage, which is a programme aimed at the elderly and senior citizens. The company also has a small business working internationally including in the UK.


Gain an understanding of – how controversial issues – such as how decisions affecting care provision for vulnerable groups – are made and how they might be improved.


Centene has emerged as a major provider of health insurance to poor and vulnerable communities in the US, and in some states it is the only provider. Whilst we believe that Centene, when it does its business well, plays an important role in enabling healthcare access for poor communities in the US, it is not without controversy.


We engaged with the company over the course of 2022 to understand the various issues faced and how management has responded.

For example, the company received a number of significant fines in recent years for overbilling state-level healthcare agencies. These issues go back to 2017 and involve the way in which Centene was sourcing and billing states for pharmaceutical products. The company acknowledged that their approach led to overbilling and has since restructured that business so that any pharmacy management services are now provided purely as a pass-through so that the company makes no margin on these services.

There has also been a group of legal cases concerning the level of access to specialist services that patients are entitled to (known as network coverage). There are inevitably cases where coverage is incomplete (for example when a specialist retires creating a shortage in that indication at local level) but these instances tend to be temporary and are in any case addressed by enabling access to other providers – albeit sometimes further away – until coverage can be provided more locally. The first of these cases has been thrown out in Washington State. Our engagement with the company confirmed that they believe that the other cases are being taken on a contingent basis (‘no win, no fee’) and that they will also be dismissed in due course.

Potentially more problematic has been the case concerning a small child called D’ashon Morris. Centene, through its Texan subsidiary Superior, had reduced the level of care provided to D’ashon Morris which led directly to him suffering severe brain damage. It is clear in talking to the company that the case has caused quite a lot of introspection into how this happened. The Texan healthcare regulator has also been involved and has identified areas where Superior’s systems needed to be improved. The company claims that all of these areas have now been addressed and formally agreed with HSSE, and that a final settlement has been reached with D’ashon Morris’s family. We followed up with the company because we were keen to understand what the areas for improvement that were identified with HSSE were, what Superior/Centene have done to address them and whether, ultimately, these changes will ensure that these events cannot be repeated.


Partially succesful/Milestone 3:It was clear from our conversation with the company’s General Counsel and their Head of Investor Relations that substantial changes have been made to how decisions get made, particularly on foster care provision in the company’s Texan subsidiary Superior. These changes include for example, a foster care supervisory team that includes independent medical professionals to oversee feedback from clients on the company’s interactions with the foster care community. There are also now opportunities for caregivers to raise red flags before an issue becomes critical and any decision to withhold care is now subject to an appeals process to consider whether the application constitutes a medical necessity. We were impressed with the scale and scope of changes at Superior, but it is also clear that these clear improvements in governance have not been proactively rolled out across the rest of Centene’s activities.

Our investment case for Centene was originally centred around the growth opportunity from its social impact, as the company focuses on providing healthcare access to low-income and vulnerable communities across the US. We felt that the period of strongest opportunity has now passed, and the company is looking for alternative growth avenues which are necessarily less impactful. These were the prevailing reasons for us selling our position in Centene however, our remaining concerns about governance within the business did also factor into this decision-making process. We exited our position in Centene in our Health theme in Q4 2022.