The sale of Meridian, meanwhile, marks the end of a 21-year journey for David Cotton, a former chief of obstetrics and gynecology. He left to found Health Plan of Michigan with his family in 1997. It was a family business right from the start. The Cottons mortgaged their home, maxed out credit cards and saved on office cleaning costs by doing it themselves, according to a 2016 profile in DBusiness magazine.
Cotton set out to differentiate his company by seeking to pay claims quickly. As it added members, it started to acquire other health plans and had revenue of $275 million by 2008, DBusiness said.
It remained a family business, with David as CEO and chairman and sons Jon and Michael as corporate president and chief operating officer, respectively. A third son, Sean, is president of the company’s pharmacy benefit manager, MeridianRx.
Surprise Change
Now the family is stepping back. They won’t remain involved with the business after the deal is completed, according to a May 29 conference call.
That seemed highly unlikely just a few years earlier.
“I know that if we ever sold, nobody would take care of our members the way we do,” Jon Cotton told DBusiness in 2016. “No one would take care of our employees the way we do. So you know what? Why would we do it? It’s a successful business, we make enough money, and we don’t need to sell.”
After announcing the deal, the family said it had a change of heart in 2017 after concluding it needed additional financing to grow and found the “ideal partner” in WellCare.
There will be plenty of risks for the combined firm. Medicaid is jointly funded by states and the federal government. The Trump administration has proposed cuts to Medicaid, though Congress appears to have little appetite to do so. The health program is straining states’ budgets, so some are seeking to limit its growth, such as by requiring some Medicaid beneficiaries to work or get job training.
After the sale, the Cotton family may have more time for that perennial billionaire investment: real estate. They already own Meridian’s headquarters in downtown Detroit, along with Quicken’s Gilbert.
This article was provided by Bloomberg News.