Humana Accelerates Value-Based Care Strategy with Home Health Providers, Others

Humana Inc. (NYSE: HUM) continues to shift its operations toward value-based care payment models, both with internal service lines and with external provider partnerships. The Louisville, Kentucky-based insurance giant is also doubling down on social determinants of health at the same time.

Those are just a couple key takeaways from a Tuesday conference call with investors and analysts to discuss Humana’s third quarter financial results.

With full-year expected individual Medicare Advantage (MA) growth of about 375,000 members, Humana is one of the largest MA entities in the nation. In addition to its MA business, Humana oversees a vast collection of in-house health care services, many of which are wrapped around the home.

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“The Medicare Advantage program incentivizes a holistic focus on health,” Humana President and CEO Bruce Broussard said during the call. “And because of this, it offers an opportunity for private organizations like Humana to partner with providers on value-based care models customized to meet both the unique dynamics of the local market and the risk tolerance of a given provider.”

Currently, about two-thirds of Humana’s individual MA members are cared for by providers in value-based arrangements. Of those arrangements, nearly one-third are for full risk, meaning a provider is responsible for the entirety of the member’s care for a capitated payment.

Generally, value-based care payment models pay providers for the value of their services instead of volume. While some providers have been hesitant to move away from the predictability of fee for service, most of the ones working with Humana on a value-based care basis have ended up making money.

In fact, 86% of Humana’s value-based care partners were in a surplus in Q3 2020, receiving a higher level of payment than they would have in a fee-for-service arrangement.

Internally, Humana’s provider organizations that are part of this value-based care shift include its senior-focused and payer-agnostic primary care centers launched through a strategic partnership with PE powerhouse Welsh, Carson, Anderson & Stowe (WCAS). They also increasingly include its Kindred at Home operations and its Conviva care centers, which are separate from the WCAS partnership.

“We do continue to also want to grow the value base from us building our clinics and our home health side,” Broussard said. “You see the Partners in Primary Care product, the Conviva product, along with some of our home solutions moving more and more to value-based payment models.”

Home health admissions

Humana expects to grow its individual MA membership by 350,000 to 400,000 members in 2021, which represents growth of about 9% to 10%, according to the company.

It likewise anticipates further building out its primary care network.

Despite operational challenges related to the COVID-19 pandemic, Humana has opened up five new Partners in Primary Care centers with WCAS in the Las Vegas market over the last 45 days. It plans to open another three centers in Las Vegas later this year or in Q1 2021, while also deepening its Houston footprint.

Combined with its Conviva clinics, Humana will operate about 160 clinics by the first quarter of next year.

Regarding Kindred at Home, home health admissions were adversely impacted by the COVID-19 virus in early spring. As the year progressed, however, volumes began to stabilize, Humana CFO Brian Kane said during Tuesday’s call.

“Early signs of a rebound in demand are beginning to materialize,” Kane said. “Further, the company has been able to offset these initial challenges with strong clinical and overhead cost controls across the organization.”

Humana reported consolidated revenues of about $20.08 billion for Q3 2020, up 24% compared to $16.24 billion in the same period last year. Revenue for Humana’s health care services segment, which includes Kindred at Home, totaled $7.13 billion in Q3 2020, up 8% compared to $6.60 billion in the prior year’s quarter.

Although the health insurance giant is preparing for a possible loss in Q4, its strong first half of 2020 should set it up for potential M&A opportunities, Kane suggested.

“We do have ample capital and flexibility, which we believe is important,” he said. “I would say that over the next few years, we expect to have a balanced capital-deployment strategy. We’re always on the hunt for M&A opportunities in the strategic priority areas that we’ve identified, whether it’s around the home, primary care or pharmacy.”

‘The smallest actions’

Among Humana’s most visible initiatives around addressing social determinants of health has been its partnership with Papa, the startup that connects isolated older adults and others with a “Papa Pal.”

The Miami-based Papa announced a Series B round of $18 million in September, with investment led by Comcast Ventures, Comcast Corporation’s investment arm. On its end, Humana began working with Papa in 2018.

The COVID-19 pandemic has further highlighted the importance of social needs, such as social interaction, Broussard said on the Q3 earnings call. In response to those needs, Humana has extended its program with Papa.

Broussard specifically shared the story of a Humana member named Otis.

While registering Otis for the Papa program, a case manager noticed it was his birthday. The case manager, in turn, began singing happy birthday to him over the phone.

“Otis was overcome with emotion, noting it had been years since someone had even wished him a happy birthday,” Broussard said. “Sometimes the smallest action can make a big difference in someone’s life. Programs like Papa are an important element in addressing the holistic needs of our members.”

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