Centene Promises Growth From Out-Of State Acquisitions, Local Consolidation

July 30--It sounds like a big promise.

In less than five years, Medicaid managed-care company Centene says two office high-rises -- one 28 stories, the other 34 stories -- and some 2,000 employees will be new additions to downtown Clayton.

About 1,000 of those employees will come from consolidating Centene's existing operations within Missouri, where it currently employs some 2,900 people. Almost all of them -- about 2,600 -- work in the St. Louis area, in offices from Chesterfield to Ferguson.

More than 1,000 already work at Centene's 17-story Clayton headquarters, where it has expanded beyond the eight floors it originally occupied as its need for space has grown.

Another 1,000 employees would be so-called "new jobs," added through natural growth or mergers and acquisitions to a corporate campus where they could expect to earn an average of $73,000.

That seems reasonable to Steve Halper, a New York analyst covering Centene for FBR Capital Markets.

"In terms of planning for long-term growth, I think they do a very good job of it," Halper said. "What it demonstrates is that they expect the company to continue to grow."

Centene's core business is running state Medicaid programs, and it could continue to add states. But it is also growing its insurance product offerings, and Halper said the company could continue to add new services.

Building office space is a good corporate strategy, and building plenty of new space near its existing headquarters jibes with its reputation for running a pretty centralized operation, he said. They have plenty of people in the field, but they have "good management controls at the headquarter level."

Centene recently became the largest Medicaid managed-care company in the country with its $6 billion purchase of California-based Health Net Inc., doubling the people it covered.

Its application for state incentives, released last month, implied that a fair amount of its local job growth would come from moving Health Net jobs from California to the St. Louis area.

"The primary purpose of the new facility would be to house certain functions that currently reside in California," the company wrote in its application. "Secondarily, new jobs from the organic growth of Centene would be located in the proposed facility."

The company's application specifically says the state financing would "offset new-hire recruitment and training costs, and relocation costs related to California employees."

Centene asked for some $45 million in state incentives to aid its expansion, as well as about $95 million in local tax abatement, according to the application. Centene, though, says the local abatement would have a final value of between $88 million and $135 million, including 50 percent local tax abatement.

However, Centene spokeswoman Marcela Hawn said in an email that the company would add new corporate positions to the planned Clayton headquarters through new growth.

"Our plan is to fill open Corporate positions related to Health Net growth through our normal new-hire recruiting process," she wrote. "For example, accounting has numerous positions in Clayton that need to be filled by year-end. Many of these new hires are related to Health Net growth. These positions would reside in Missouri/Clayton."

Already, the company is growing at a breakneck pace, and even the new employees that join its workforce of about 25,000 outside of Missouri tend to come to the Clayton headquarters to train. It's one of the reasons the second phase of Centene's expansion would include a hotel and event space as part of a 34-story office complex.

"We're hiring about 40 people a week," said Robert Clark, CEO of developer Clayco, which is handling Centene's campus expansion project. "We're doing a tremendous amount of training on this campus for the other locations Centene has."

Centene is actually planning for well over 2,000 employees. Its building plans call for capacity for up to 2,800 employees in downtown Clayton. Plus, there would room for close to 2,000 more workers in the two office towers, which the company will lease to third parties. But as it has done in its current headquarters, it could move into more than the original footprint it occupied as leases expire and its need for space grows.

And a third phase, one without a timeline yet, could add another 25-story office building to the west of Centene's existing tower. How much space will the company need after 2020? It's not clear even Centene knows yet.

Post-Dispatch reporter Samantha Liss contributed to this report.

Jacob Barker --314-340-8291

@jacobbarker on Twitter

[email protected]

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