Humana raises earnings outlook, still looks to expand with Walmart
LOUISVILLE, Ky. (WDRB) – Humana’s second-quarter profits were almost entirely wiped out by a $790 million loss the Louisville-based company took so it can exit the long-term care insurance business.
But results for Humana’s core operations still topped Wall Street estimates, and the company raised its expectation of core-business earnings for 2018, mainly due to growth in its flagship Medicare Advantage franchise.
Humana reported “adjusted” earnings – a metric that excludes one-off charges like the loss on the pending sale of the long-term care policies – of $549 million for the April-June period, topping Wall Street expectations of $522 million, according to Leerink Partners. Earnings were up about 8 percent from the same period last year.
During a call with analysts, CEO Bruce Broussard touted the company’s expansion of in-home medical care for seniors enrolled in Medicare Advantage through the recent acquisitions of a division of Louisville-based Kindred Healthcare and a hospice operator based in North Carolina.
He added that Humana’s testing of primary-care clinics for Medicare members in two Walgreens pharmacies does not mean Humana is less interested in expanding its retail presence with competitor Walmart.
Humana and Walmart have sold a co-branded Medicare prescription drug plan since 2011, and last spring The Wall Street Journal reported that Walmart was in preliminary talks about buying Humana, among other options to deepen their partnership.
Meanwhile, Humana said in June it would test “senior-focused” primary care clinics at a pair of Walgreens stores in the Kansas City area.
“We still value and have a strong relationship with Walmart and continue to see that relationship both being what it is today and continuing to look at ways to expand that,” Broussard said, without adding details. “… They and us serve similar customer segments and working together, we both can serve the customers in a much more comprehensive way.”
Broussard said he sees distinct “opportunities” with Walgreens and with Walmart, and Humana’s plans to expand its retail footprint aren’t settled.
“Both of them are complimentary and not competitive,” Broussard said. “…I would look at this as more of a ‘test and learn’ (period than) as a commitment to either party as a partnership.”
Trying to ‘do something that has never been done’ in home health
Wednesday was the company’s first earnings report since Humana and a pair of private equity firms completed their acquisitions of Louisville-based Kindred Healthcare and of Curo Health Services, a North Carolina hospice operator.
Humana spent $1.1 billion for its stake in the companies, giving it the U.S.’s largest home health and hospice operator when the two are combined, Broussard said.
Humana hopes Kindred’s At Home division and Curo will help it provide more in-home care for the seniors enrolled in Medicare Advantage while shifting to a payment model that rewards outcomes rather than the volume of care provided.
The idea is to help seniors better manage chronic conditions like COPD, congestive heart failure and diabetes, Broussard said, keeping them healthier and reducing costs.
“We are striving to do something that has never been done before in home health,” Broussard said, referring to the shift toward “value-based” payments.
Humana shares were up 3.5 percent in morning trading on Wednesday. The company’s stock has soared 36 percent in the last 12 months, compared to 14 percent for the broader S&P 500 stock index.