Deeming it an asset that does not fit within the company’s long-term strategy, Coventry Health Care has agreed to sell its fee-based Medicaid Services Business to a Connecticut company for $110 million.

Bethesda, Md.-based Coventry announced the sale of its First Health Services Corp. subsidiary to Magellan Health Services Inc. of Avon, Conn., in an all-cash transaction, according to Magellan.

Magellan also signed service agreements with Coventry to manage radiology services on a risk basis and to provide oncology management services in five Coventry markets.

First Health Services, based in Glen Allen, Va., provides pharmacy benefits administration, health care management, and IT services to state Medicaid programs.

Allen F. Wise, Coventry’s CEO, said in a statement that following an internal evaluation of all its business, “we determined that [First Health Services] was not an asset that complemented the company’s long-term strategy.”

René Lerer, CEO and chairman of Magellan, said the company is “very pleased to announce this important transaction,” and excited about the opportunity it creates.

“The acquisition allows us to expand our capabilities into a new area, Medicaid pharmacy benefits administration, that is complementary to our existing businesses. This constitutes an important step in furthering the company’s diversification strategy,” Lerer said.

He added that Magellan currently serves Medicaid programs through three lines of business – behavioral health, radiology benefits management and specialty pharmacy – and that the acquisition of Coventry’s subsidiary “will significantly enhance our opportunities and provide another platform for continued growth in this market segment.”

The transaction is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the third quarter of this year.