- Acquisition reflects Humana’s continued commitment to investing
in home-based clinical solutions that drive improved patient
outcomes, increased satisfaction for patients and providers and
value for health plan partners
- Kindred at Home’s home health business to be integrated into
Humana’s Home Solutions business and will transition to Humana’s
payer-agnostic healthcare services brand – CenterWell – as
CenterWell Home Health
- Fully integrating home health allows Humana to accelerate
clinical innovation and the introduction of a value-based operating
model at scale, more closely aligning incentives to focus on
improving patient outcomes and reducing the total cost of care
- Humana intends to divest majority stake in Kindred at Home’s
hospice and community care operations
Humana Inc. (NYSE: HUM) today announced it has signed a
definitive agreement to acquire the remaining 60 percent interest
in Kindred at Home (KAH), the nation’s largest home health and
hospice provider, from TPG Capital (TPG), the private equity
platform of global alternative asset firm TPG, and Welsh, Carson,
Anderson & Stowe (WCAS), a leading private equity firm focused
exclusively on the healthcare and technology industries (together,
the Sponsors), for an enterprise value of $8.1 billion, which
includes Humana’s existing equity value of $2.4 billion associated
with its current 40 percent minority ownership interest. KAH
employs approximately 43,000 caregivers providing home health,
hospice and community care services to over 550,000 patients
annually. KAH has locations in 40 states, providing extensive
geographic coverage with approximately 65 percent overlap with
Humana’s individual Medicare Advantage membership.
This acquisition reflects Humana’s continued commitment to
investing in home-based clinical solutions that drive improved
patient outcomes, increased satisfaction for patients and providers
and value for health plan partners. Over the last year, Humana,
together with KAH management, took significant ground in continuing
to prove out home-based care models’ impact on preventable events
and assembling supporting clinical capabilities ranging from
preventive to higher acuity, emergent, hospital-level care.
Underpinning these clinical advancements was the development of a
platform to share and analyze information between the health plan
and home health agency, facilitating the delivery of proactive and
individual care plans. This approach delivers personalized, and
more comprehensive whole person care and supports care continuity
by engaging in-home physician and urgent care resources when a
patient does not have immediate access to a primary care physician
or if symptoms need immediate escalation.
Acceleration of the KAH acquisition provides Humana the
opportunity to more quickly implement and scale the value-based
models and clinical innovation it has designed, focusing on total
cost of care and delivering outcomes and value beyond what is
possible in a traditional, fee for service model.
“We continue to invest in assets that allow Humana to better
manage the holistic needs of our members and patients by expanding
care in the home, including primary care, telehealth, and emergency
room care, while also addressing social determinants of health,”
said Bruce D. Broussard, Humana’s President and Chief Executive
Officer. “Since our initial investment in Kindred at Home, in
partnership with the Sponsors and Kindred at Home management, we’ve
learned a great deal about the home health space and recognize the
significant value we can deliver to members and patients by
integrating this asset into our holistic approach to care. Fully
integrating Kindred at Home will enable us to more closely align
incentives to focus on improving patient outcomes and on reducing
the total cost of care. This is critical to deploying at scale a
value-based, advanced home health model that makes it easier for
patients and providers to benefit from our full continuum of
home-based capabilities, leveraging the best channel to deliver the
right care needed at the right time.”
“We have been proud to work with management and our partners to
invest behind and build best-in-class clinical care at Kindred at
Home,” said Jeff Rhodes, Partner at TPG. “Through our collective
partnership, we have established innovative care pathways that
prioritize value on behalf of patients while enabling a more
seamless and integrated care experience.”
“Kindred at Home represents the collaboration between the
company’s management team, WCAS and our partners to build the
nation’s leading home health and hospice platform,” said Ed Sobol,
General Partner at WCAS. “The company consistently delivers
outstanding patient experience and outcomes at lower overall
cost.”
As part of the transaction, KAH’s home health operations will be
integrated into Humana’s Home Solutions business led by Susan
Diamond, Segment President. When combined with KAH, Humana’s Home
Solutions geographic scale and clinical breadth provides the
opportunity to offer care beyond Humana members. As a result, KAH
will adopt Humana’s new payer-agnostic healthcare services brand –
CenterWell – transitioning to CenterWell Home Health.
Hospice and personal care services continue to be important
offerings in the full continuum of care Humana intends to offer
patients. However, Humana has been successful in delivering the
desired patient experience and outcomes through partnership models,
including through participation in the Centers for Medicare and
Medicaid Services (CMS) hospice Value-Based Insurance Design (VBID)
model. Therefore, while KAH’s hospice and community care operations
are included in the transaction, Humana intends to ultimately only
maintain a minority interest in this portion of the asset. The
company is exploring, among other things, a public listing,
conditions permitting, or another potential transaction, and
intends for the future independent company to be led by David
Causby, the current Chief Executive Officer of Kindred at Home.
There is no assurance about the timing and certainty of any such
transaction.
”Humana embarked on a journey with Kindred at Home in 2018 with
the belief that a key component of the next generation of its
integrated care delivery model was the ability to provide care to
consumers, including Humana members, in their home at scale,
meeting them where they want to be, in a preferred lower cost
setting, while also recognizing that the traditional volume-based,
fee-for-service model limited innovation in home health,” said
Susan Diamond, Humana’s Segment President – Home Business. “Our
work with Kindred at Home allowed us to learn more about the
advanced clinical models needed, proved that we can execute on the
needed innovation, demonstrated that we can drive penetration and
gave us confidence we can support a higher acuity patient by
leveraging the other home-based assets and capabilities we’ve
assembled. Kindred at Home continues to demonstrate superior
patient outcomes, including reduced hospitalizations, readmissions,
and ER utilization even as their penetration of Humana episodes
increased from 8 percent to 19 percent in markets with geographic
overlap.”
This acquisition, which is expected to close in the third
quarter of 2021, is subject to customary state and federal
regulatory approvals. Humana expects to fund the approximately $5.7
billion transaction (net of Humana’s existing equity stake) through
a combination of parent company cash and debt financing. The
company does not anticipate a material impact to earnings in 2021
from this pending transaction. Humana expects the transaction to
provide modest additional financial flexibility for 2022.
Goldman Sachs & Co. LLC is acting as financial advisor to
Humana. Fried, Frank, Harris, Shriver & Jacobson LLP and
Manatt, Phelps & Phillips LLP are acting as legal advisors to
Humana. Barclays and Guggenheim Securities, LLC are acting as
financial advisors to Kindred at Home. Debevoise & Plimpton and
Mintz are acting as legal advisors to Kindred at Home.
Humana management will discuss this transaction during their
first quarter 2021 (1Q21) earnings call on Wednesday, April 28,
2021 at 9:00 a.m. Eastern time. A webcast of the 1Q21 earnings call
may be accessed via Humana’s Investor Relations page at
www.humana.com.
Cautionary Statement
This news release includes forward-looking statements regarding
Humana within the meaning of the Private Securities Litigation
Reform Act of 1995. When used in investor presentations, press
releases, Securities and Exchange Commission (SEC) filings, and in
oral statements made by or with the approval of one of Humana’s
executive officers, the words or phrases like “expects,”
“believes,” “anticipates,” “intends,” “likely will result,”
“estimates,” “projects” or variations of such words and similar
expressions are intended to identify such forward-looking
statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and
assumptions, including, among other things, information set forth
in the “Risk Factors” section of the company’s SEC filings, a
summary of which includes but is not limited to the following:
- If Humana does not design and price its products properly and
competitively, if the premiums Humana receives are insufficient to
cover the cost of healthcare services delivered to its members, if
the company is unable to implement clinical initiatives to provide
a better healthcare experience for its members, lower costs and
appropriately document the risk profile of its members, or if its
estimates of benefits expense are inadequate, Humana’s
profitability could be materially adversely affected. Humana
estimates the costs of its benefit expense payments, and designs
and prices its products accordingly, using actuarial methods and
assumptions based upon, among other relevant factors, claim payment
patterns, medical cost inflation, and historical developments such
as claim inventory levels and claim receipt patterns. The company
continually reviews estimates of future payments relating to
benefit expenses for services incurred in the current and prior
periods and makes necessary adjustments to its reserves, including
premium deficiency reserves, where appropriate. These estimates
involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends. Accordingly,
Humana's reserves may be insufficient.
- If Humana fails to effectively implement its operational and
strategic initiatives, particularly its Medicare initiatives and
state-based contract strategy, the company’s business may be
materially adversely affected, which is of particular importance
given the concentration of the company’s revenues in these
products. In addition, there can be no assurances that the company
will be successful in maintaining or improving its Star ratings in
future years.
- If Humana fails to properly maintain the integrity of its data,
to strategically maintain existing or implement new information
systems, to protect Humana’s proprietary rights to its systems, or
to defend against cyber-security attacks or prevent other privacy
or data security incidents that result in security breaches that
disrupt our operations or in the unintended dissemination of
sensitive personal information or proprietary or confidential
information, the company’s business may be materially adversely
affected.
- Humana is involved in various legal actions, or disputes that
could lead to legal actions (such as, among other things, provider
contract disputes and qui tam litigation brought by individuals on
behalf of the government), governmental and internal
investigations, and routine internal review of business processes
any of which, if resolved unfavorably to the company, could result
in substantial monetary damages or changes in its business
practices. Increased litigation and negative publicity could also
increase the company’s cost of doing business.
- As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or
ability to participate in government healthcare programs including,
among other things, loss of material government contracts,
governmental audits and investigations, potential inadequacy of
government determined payment rates, potential restrictions on
profitability, including by comparison of profitability of the
company’s Medicare Advantage business to non-Medicare Advantage
business, or other changes in the governmental programs in which
Humana participates. Changes to the risk-adjustment model utilized
by CMS to adjust premiums paid to Medicare Advantage, or MA, plans
according to the health status of covered members, including
proposed changes to the methodology used by CMS for risk adjustment
data validation audits that fail to address adequately the
statutory requirement of actuarial equivalence, if implemented,
could have a material adverse effect on our operating results,
financial position and cash flows.
- Humana's business activities are subject to substantial
government regulation. New laws or regulations, or legislative,
judicial, or regulatory changes in existing laws or regulations or
their manner of application could increase the company's cost of
doing business and have a material adverse effect on Humana’s
results of operations (including restricting revenue, enrollment
and premium growth in certain products and market segments,
restricting the company’s ability to expand into new markets,
increasing the company’s medical and operating costs by, among
other things, requiring a minimum benefit ratio on insured
products, lowering the company’s Medicare payment rates and
increasing the company’s expenses associated with a non-deductible
health insurance industry fee and other assessments); the company’s
financial position (including the company’s ability to maintain the
value of its goodwill); and the company’s cash flows.
- Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s results of operations, financial position,
and cash flows.
- If Humana fails to develop and maintain satisfactory
relationships with the providers of care to its members, the
company’s business may be adversely affected.
- Humana’s pharmacy business is highly competitive and subjects
it to regulations and supply chain risks in addition to those the
company faces with its core health benefits businesses.
- Changes in the prescription drug industry pricing benchmarks
may adversely affect Humana’s financial performance.
- Humana’s ability to obtain funds from certain of its licensed
subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings, should they occur, may
adversely affect its business, results of operations, and financial
condition.
- The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
- The spread of, and response to, the novel coronavirus, or
COVID-19, underscores certain risks Humana faces, including those
discussed above, and the ongoing, heightened uncertainty created by
the pandemic precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19.
To the extent that the spread of COVID-19 is
not contained, the premiums the company charges may prove to be
insufficient to cover the cost of health care services delivered to
its members, which may increase significantly as a result of higher
utilization rates of medical facilities and services and other
increases in associated hospital and pharmaceutical costs. Humana
may also experience increased costs or decreased revenues if, as a
result of the company’s members being unable or unwilling to see
their providers due to actions taken to mitigate the spread of
COVID-19, Humana is unable to implement clinical initiatives to
manage health care costs and chronic conditions of its members, and
appropriately document their risk profiles. In addition, Humana is
offering, and has been mandated by legislative and regulatory
action (including the Families First Act and CARES Act) to provide,
certain expanded benefit coverage to its members, such as waiving
out of pocket costs for COVID-19 testing and treatment. Humana is
also taking actions designed to help provide financial and
administrative relief for the health care provider community. Such
measures and any further steps taken by Humana, or governmental
action, to continue to respond to and address the ongoing impact of
COVID-19 (including further expansion or modification of the
services delivered to its members, the adoption or modification of
regulatory requirements associated with those services and the
costs and challenges associated with ensuring timely compliance
with such requirements), to provide further relief for the health
care provider community, or in connection with the relaxation of
stay-at-home and physical distancing orders and other restrictions
on movement and economic activity, including the potential for
widespread testing and therapeutic treatments and the distribution
and administration of COVID-19 vaccines, could adversely impact the
company’s profitability.
The spread and impact of COVID-19, or actions
taken to mitigate this spread, could have material and adverse
effects on Humana’s ability to operate effectively, including as a
result of the complete or partial closure of facilities or labor
shortages. Disruptions in public and private infrastructure,
including communications, availability of in-person sales and
marketing channels, financial services and supply chains, could
materially and adversely disrupt the company’s normal business
operations. Humana has transitioned a significant subset of its
employee population to a remote work environment in an effort to
mitigate the spread of COVID-19, as have a number of the company’s
third-party service providers, which may exacerbate certain risks
to Humana’s business, including an increased demand for information
technology resources, increased risk of phishing and other
cybersecurity attacks, and increased risk of unauthorized
dissemination of sensitive personal information or proprietary or
confidential information about the company or its members or other
third-parties. The outbreak of COVID-19 has severely impacted
global economic activity, including the businesses of some of
Humana’s commercial customers, and caused significant volatility
and negative pressure in the financial markets. In addition to
disrupting Humana’s operations, these developments may adversely
affect the timing of commercial customer premium collections and
corresponding claim payments, the value of the company’s investment
portfolio, or future liquidity needs.
The ongoing, heightened uncertainty created
by the pandemic precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19. Humana is continuing to monitor the
spread of COVID-19, changes to the company’s benefit coverages, and
the ongoing costs and business impacts of dealing with COVID-19,
including the potential costs and impacts associated with lifting
or reimposing restrictions on movement and economic activity, the
timing and degree in resumption of demand for deferred healthcare
services, the pace of administration of COVID-19 vaccines and the
effectiveness of those vaccines, and related risks. The magnitude
and duration of the pandemic and its impact on Humana’s business,
results of operations, financial position, and cash flows is
uncertain, but such impacts could be material to the company’s
business, results of operations, financial position and cash
flows.
In making forward-looking statements, Humana is not undertaking
to address or update them in future filings or communications
regarding its business or results. In light of these risks,
uncertainties, and assumptions, the forward-looking events
discussed herein may or may not occur. There also may be other
risks that the company is unable to predict at this time. Any of
these risks and uncertainties may cause actual results to differ
materially from the results discussed in the forward-looking
statements.
Humana advises investors to read the following documents as
filed by the company with the SEC for further discussion both of
the risks it faces and its historical performance:
- Form 10-K for the year ended December 31, 2020; and
- Form 8-Ks filed during 2021.
About Humana
Humana Inc. is committed to helping our millions of medical and
specialty members achieve their best health. Our successful history
in care delivery and health plan administration is helping us
create a new kind of integrated care with the power to improve
health and well-being and lower costs. Our efforts are leading to a
better quality of life for people with Medicare, families,
individuals, military service personnel, and communities at
large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right
place for their patients, our members. Our range of clinical
capabilities, resources and tools – such as in-home care,
behavioral health, pharmacy services, data analytics and wellness
solutions – combine to produce a simplified experience that makes
health care easier to navigate and more effective.
More information regarding Humana is available to investors via
the Investor Relations page of the company’s website at humana.com,
including copies of:
- Annual reports to stockholders;
- Securities and Exchange Commission filings;
- Most recent investor conference presentations;
- Quarterly earnings news releases and conference calls;
- Calendar of events; and
- Corporate Governance information.
About TPG
TPG is a leading global alternative asset firm founded in 1992
with more than $91 billion of assets under management and offices
in Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne,
Mumbai, New York, San Francisco, Seoul, Singapore, and Washington,
DC. TPG’s investment platforms are across a wide range of asset
classes, including private equity, growth equity, impact investing,
real estate, secondaries, and public equity. TPG aims to build
dynamic products and options for its investors while also
instituting discipline and operational excellence across the
investment strategy and performance of its portfolio. For more
information, visit www.tpg.com or @TPG on Twitter.
About Welsh, Carson, Anderson &
Stowe
WCAS is a leading U.S. private equity firm focused on two target
industries: technology and healthcare. Since its founding in 1979,
the Firm's strategy has been to partner with outstanding management
teams and build value for its investors through a combination of
operational improvements, growth initiatives and strategic
acquisitions. WCAS has raised and managed funds totaling over $27
billion of committed capital. For more information, please visit
www.wcas.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20210427006057/en/
Amy Smith Humana Investor Relations (502) 580-2811 e-mail:
Amysmith@humana.com
Kelley Murphy Humana Corporate Communications (502) 244-1775
e-mail: Kmurphy26@humana.com
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