NY Times: Humana Wants to ‘Own the Home’

Insurance giant Humana (NYSE: HUM) is about to become the nation’s largest hospice provider.

Specifically, Humana is acquiring a stake in the home health and hospice business of Kindred Healthcare (NYSE: KND) as part of a joint venture with two private equity firms. In addition to Kindred, Humana is buying hospice provider Curo for $1.4 billion, also with private equity firms. The company’s purchase underscores the booming business of hospice care—though the move from insurer to provider also highlights big grabs by insurance companies into lucrative and somewhat controversial businesses, The New York Times reported.

Humana’s decision to bet on hospice, rather than on primary care, proves it wants to own health care in the home and take on end-of-life care. At the same time, the deal places Humana “squarely in the middle of the debate” of emerging hospice issues, according to the NY Times.

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“In short, Humana, which provides Medicare Advantage plans to about 3 and a half million people for their medical needs, also wants to dominate care for those at the end stages of life, whether it provides aid in a home setting or in a facility,” the article reads.

However, hospice’s growth over the last several years has also given rise to worries about increasing fraud, neglect and malfeasance across the space.

“Companies have been accused of signing up people who are not terminally ill, denying visits from a nurse or even refusing a needed trip to the hospital,” the NY Times reported.

Too little care is a common danger across the industry, the article alleged, citing for-profit companies that are more driven by profits than quality of care. Some private companies can make as much as 40 cents of profit for every dollar of revenue, or a 40% profit margin, Emily Evans, a managing director for Hedgeye Risk Management, told the NY Times.

Those high profit margins have been driving a lot more interest in the hospice space, including a new influx of investments from private equity groups in both home health care and hospice.

Kindred and Curo have both had to pay millions in settlements after being accused of overbilling Medicare for hospice care services as well as accusations of kickbacks.

Other insurance providers, including UnitedHealth Group, have sold their hospice businesses as a result of these ongoing billing issues and lawsuits across the industry.

Some providers may see that the margin is simply worth the risk, the NY Times reported. Humana will also be able to better align its roughly 3 million Medicare Advantage members with in-home care services through its new acquisitions.

“Analysts say any insurer offering a Medicare Advantage plan would benefit in seeing patients opt for hospice, rather than continue much more costly treatments at the end of life,” the article reads.

Insurers that can direct terminally ill patients to hospice care can save money under the Medicare hospice benefit and also provide the care to members trhough its own hospice service line.

Coupled with Humana’s home health care business, “Humana wants to own the home,” Chas Roades, a consultant and founder of Gist Healthcare, told the NY Times.

Humana may also even be eyeing a future in which hospice care is part of Medicare Advantage—and possible carve-ins have been floated.

Written by Amy Baxter

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