LOUISVILLE, Ky. (WDRB) – Humana Inc.’s largest acquisition in its corporate history – a $5.7 billion deal to take full control of Kindred at Home – plunges the Louisville-based company deeper into the business of providing health care, instead of simply paying for it.
Humana said Tuesday it will buy out its private-equity partners to take full ownership of Kindred at Home, the largest home health and hospice operator in the U.S.
The deal is part of long-term shift in which health insurers are trying to control costs by paying doctors and hospitals in nontraditional ways – and by becoming providers themselves, said Frank Morgan, an analyst with RBC Capital Markets.
While rival insurers like United Healthcare are also getting deeper into providing healthcare, the strategy “makes especially good sense” for Humana, Morgan said.
That’s because of Humana’s main business: administering health benefits to seniors through Medicare Advantage, the privately run version of the government healthcare program.
“The fact that they’re doing this doesn’t in any way diminish their interest in growing Medicare Advantage. It only complements it,” Morgan said.
Kindred at Home employs about 43,000 nurses, physicians assistants and other caregivers who provide services to seniors in their homes.
Its 40-state footprint overlaps significantly with Humana’s Medicare Advantage members, meaning the company can use its own home-health services to reduce costs and improve the health of the seniors it insures through Medicare.
“Having home-healthcare capabilities can be particularly useful for that population, because that population stays at home a lot,” Morgan said. “And you can treat them in the home setting to avoid a hospitalization, and you can catch things preemptively. Or you can help them avoid a rehospitalization if they have been to the hospital.”
Humana and a pair of private equity firms bought the home health care unit of Kindred Healthcare — the former publicly traded company also based in Louisville — in 2018. That transaction took Kindred Healthcare private, splitting the company in two.
Humana, which today owns 40% of Kindred at Home, had always planned to become the sole owner, but Tuesday's announcement accelerates the timeline in a deal that values Kindred at Home at $8.1 billion in all.
Humana CEO Bruce Broussard said on an earnings call Wednesday that the deal allows Humana to “move from market testing to full-scale implementation” of Kindred at Home after a trial run the last couple of years.
“We recognize the significant value we can deliver to members and patients by integrating this asset into our holistic approach to care,” Broussard said.
Humana’s other recent forays into healthcare services include dozens of senior-focused primary care centers under the brands Partners in Primary Care and the Family Physicians Group.
In March the company said those clinics would adopt a new brand name: CenterWell Senior Primary Care.
Kindred at Home will also adopt the brand, becoming CenterWell Home Health, the company said.
To be sure, Humana has tried to step deeper into healthcare services before without success. In 2010, it bought Concentra, an occupational health and physical therapy provider.
Five years later, the company said Concentra “did not ultimately align with Humana’s strategy as well as we had originally anticipated.” Humana sold Concentra, saying primary care was a better fit for its Medicare-focused business.
That didn't deter Humana from the overall strategy, however.
"In recent years, we have significantly expanded our healthcare service capabilities, from primary care, to pharmacy to home care and more in order to better serve our medical members," Broussard said on Wednesday's call. "...These services help deliver on the promise of better quality health outcomes, lower costs and a simpler, more personalized experience for the people they touch."
About half of Kindred at Home is a hospice segment, which Humana plans to spin off as a separate company while maintaining only a minority stake.
Humana can help pay for the Kindred at Home buyout in part by having the hospice spinoff company incur debt, Morgan said.
Humana’s ability to swallow an $8.1 billion enterprise underscores the company’s growth in the four years since its planned sale to health insurer Aetna was blocked the Justice Department. Aetna would have paid $34 billion for Humana. Today, the company is worth about $57 billion in the stock market.