Capped contract for Vanguard in Arizona

Deal covers almost 100,000 Medicaid members

The Arizona insurance subsidiary of Vanguard Health Systems has agreed to terms with Arizona officials on a capped contract that will give it the chance to keep about half of its members from Oct. 1 on.

The Arizona Health Care Cost Containment System last week told Vanguard that VHS Phoenix Health Plan's Medicaid managed care contract for nine counties will not be renewed this fall. Phoenix Health Plan accounts for about $600 million in annual revenues and rang up first-half EBITDA of about $25 million. Its new capped contract covers only Maricopa County, which includes Phoenix proper, and is for three years. As of year-end 2012, a little more than 98,000 people in Maricopa were Phoenix Health Plan members.

Under terms of the deal, Arizona officials will not lift the cap during that time and plan to hold an open-enrollment period for Phoenix Health members at some point in 2014.

Shares of Vanguard (Ticker: VHS) fell 2 percent Monday to $14.56 but rose about 1 percent in after-hours trading before the news of the capped contract was made official. They're down about 12 percent since last week's non-renewal news.