ghmm... Really good question. We have been discussing about that particular topic for a long time (more than a year) about 5-6 years ago (as MDF financials was very shaky back then) and then we stopped talking about it because seems that it seems to be win win situation for Humana to subcontract their patient care to MDF (and then 6 years later, HUM and MDF relationship seems to be just fine, so maybe the risk is not too high, but it's out there.. it's possible that Humana and MDF break of their relationship). and if that is the case, then MDF will be very crippled (I would guess they will cease their business altogether, as their retail , non-humana related is peobably only less than 20% of their total business, if I remember the number correctly. at one point 92% of their business was Humana). Because of that reason I think MDF tried to open/be their HMO business and recently they sold it to Humana after a couple years of losses on the HMO division (i.e. it's not easy to operate/build HMO business, and MDF expertise is apparently PSN)
What more likely to happen IMO (if the current relationship have to change drastically towards the worse for MDF) to MDF is HUM will buy MDF at a depressed price (with the threat of leaving MDF altogether if MDF doesn't accept the bid).
It's not easy to open a PSN service in the MDF established area (of similar network coverage) for HUM to switch to.
And again I think it is a win win situation for HUM and MDF right now, so I don't think HUM will risk, just to squeeze a bit more profit.
and if you see MDF is a low margin business. high sales and low bottom line profit, while HUM is higher margin (they take their cut and let MDF carry the risk).
And in some ways I think HUM will be better off if MDF is doing well. If MDF is about to go under, HUM will get a headache on figuring out where will I move their patient (Medicare members), and taking them into HUM network (and possibly have to open or subcontract other PSN in the area could probably a headache for them and their members).
This is all just my opinion.
Stan
