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Just take a look at this recent blockbuster healthcare merger.
Giant managed care firm WellPoint Inc. (NYSE: WLP) announced July 9 that it would buy Amerigroup Corp. (NYSE: AGP), the country's largest private Medicaid managed care company, for $4.9 billion in cash.
The day acquisition was announced, Amerigroup stock jumped 38%.
Of course, healthcare mergers and acquisitions (M&A) are nothing unusual. But a close look at this deal sheds light on the direction of the next major trend of consolidation within the industry.
In fact, when it narrowly upheld the Affordable Care Act (informally known as Obamacare), the Supreme Court unwittingly set the table for a new wave of M&A in a downtrodden healthcare space --Medicaid.
Government-sponsored programs like Medicaid and Medicare have traditionally been viewed as ho-hum businesses with razor-thin profit margins.
So why is WellPoint jumping with both feet into a business that is typically not a big money maker?
Let's take a closer look...