News in brief - June 22, 2009

Coventry sells part of its Medicaid business - Aetna stock price declines following revised earnings forecast

Coventry sells part of its Medicaid business

Bethesda, Md.-based Coventry Health Care has agreed to sell its Medicaid pharmacy benefits and administrative service business to Magellan Health Services for $110 million in cash.

In conjunction with the deal, Coventry hired Magellan subsidiaries National Imaging Associates and ICORE Healthcare to manage its imaging and oncology benefits in five markets for at least the next three years.

Coventry Chief Executive Officer Alan Wise, who in January took the company's top executive position for the second time, said that after a review of Coventry's business, the leadership determined that the business, acquired with its First Health Group purchase in 2005, "was not an asset that complemented the company's long-term strategy."

Coventry will continue to act as a Medicaid managed care organization in eight states.

Aetna stock price declines following revised earnings forecast

In a June 2 announcement, Aetna adjusted its profit forecast for the year, down from a range of $3.85 to $3.95 per share to a range of $3.55 to $3.70 per share -- about a 6% adjustment.

Aetna's full-year earnings were down in 2008 to $2.83 per share from $3.47 in 2007. The company cited continued upticks in commercial medical costs and lower-than-expected Medicare revenue.

In a conference call with investment analysts, Aetna executives said the economy was prompting members to seek more care and more costly care, but that the company would adjust for those higher costs by raising prices for 2010, even at the risk of losing members.

Aetna's stock was trading at around $23 per share in mid-June, compared with about $45 per share a year earlier.