Back in 2018, it felt like the health care sector was on the verge of a massive shift, driven by a desire from payers to better manage their members’ total cost of care with enhanced in-home capabilities.
Much of that feeling came from watching Humana Inc. (NYSE: HUM). The Louisville, Kentucky-based health insurer teamed up with TPG Capital and Welsh, Carson, Anderson & Stowe to acquire Kindred at Home in July of that year, with the trio then completing a deal for Curo Health Services less than two weeks later.
After Humana signaled its intent to “own the home,” many believed its peers would inevitably do the same. When Medicare Advantage (MA) organization Devoted Health launched in 2018, co-founder Ed Park even touted that very specific mission.
“We are on a mission to deliver to our members the kind of care that we all would want for our own family,” Park said at the time. “To do that, we have started from a clean sheet of paper, building a ‘payvidor’ — a combination of a ‘payor’ and ‘provider’ of health care services — that in addition to partnering with the most trusted doctors and hospitals, will be a provider of care services in the home designed to help keep our members healthy.”
In some ways, this strategy felt like health care’s version of Manifest Destiny. Payers were destined to aggressively expand into providers’ territory, especially around the home.
Fast-forward to 2021: That trend never really played out in full force.
Plenty of payers have spent millions of dollars investing in at-home care services since 2018, but not at the levels that many experts anticipated. Similarly, some of the large national insurers have made a handful of key acquisitions, though arguably none with the size or significance of Kindred at Home and Curo Health Services.
The COVID-19 pandemic is changing that, however, and payers once again have their sights set on the home.
Looking for a bottom-line boost
Health insurers posted astronomical profits early on in 2020, as many of their members were delaying care due to the public health emergency. But as coronavirus-related costs and hospitalization figures started to rise, many of those same insurers saw their financials dip.
While Humana remained firmly in the black for 2020 overall, it reported a roughly $274 million loss in the fourth quarter, for example. Centene Corporation (NYSE: CNC) posted a loss of about $12 million, largely attributable to higher-than-expected costs related to COVID-19 testing and treatment.
“Early in 2020, we told you the year would be choppy,” Centene CEO Michael Neidorff said during the company’s Q4 earnings call. “And it was.”
Of all the national insurers, Cigna (NYSE: CI) was the most profitable in the fourth quarter, bringing in $4.1 billion in earnings for the quarter. Still, its profit numbers fell short of Wall Street expectations.
CVS Health (NYSE: CVS) ended the fourth quarter of 2020 with $973 million in profit, down roughly 44% compared to $1.7 billion in Q4 2019. Anthem Inc. (NYSE: ANTM) ended the fourth quarter with profits of $551 million, similarly down 41% from $934 million in Q4 2019.
On its end, UnitedHealth Group (NYSE: UNH) reported a profit of $2.2 billion in the fourth quarter of last year. That was down by about 38% compared to $3.5 billion in the same period in 2019.
“We remain in a time of unprecedented challenges for individuals, employers and the health system broadly, particularly for front-line clinicians, including our own,” UnitedHealth Group CEO David Wichmann said during a Q4 earnings call. “Health systems across the world have been — and continue to be — stressed.”
Lots of things factor into these companies’ bottom lines, but hospitalizations are usually one of the top costs for insurers. That’s certainly been true during the COVID-19 crisis, statistics from Avalere Health suggest.
Overall, in-patient COVID-19 hospitalizations could cost the U.S. health care system between $9.6 billion and $16.9 billion in 2020, according to Avalere. The Washington, D.C.-based consulting firm projects commercial payers to shoulder the bulk of that load, footing between $5.6 billion and $9.9 billion of the bill.
One of the best ways to avoid skyrocketing hospital costs is to invest big in home-based care.
An ‘essential’ part of health care’s future
Many of the national insurers have publicly outlined their plans to double down on the home.
Unsurprisingly, Humana has been the busiest, most recently teaming up with DispatchHealth to offer advanced hospital-level care in the home. Its home-focused moves since the start of last year also include a $100 million investment in physician house call group Heal.
Cigna hasn’t been as active, but it too has talked about the importance of the home.
“There were … a number of accelerating trends that will further drive fundamental changes in health care [in 2020],” CEO David Cordani said during Cigna’s Q4 earnings call. “We see care access rapidly changing as a result of consumer behavior, and technology and data innovation leading to growing use of virtual visits and coordinated home-based care all aided by advancements in remote monitoring as well.”
Meanwhile, CVS Health has spent the past few years building a “home health hub.” Part of that mission included partnering with Aloe Care to launch “Symphony,” a medical-alert system that is designed to keep seniors safe and connected at home.
“You can almost imagine how the future of these home health hubs for seniors really integrates with mechanisms that address social determinants of health,” Adam Pellegrini, SVP of enterprise virtual care and consumer health at CVS Health, previously told Home Health Care News.
CVS Health additionally invested more than $114 million in affordable housing last year.
UnitedHealth Group could be on the brink of making the biggest home-based care splash in the near term. Citing “sources familiar with the situation,” M&A intelligence service Mergermarket reported in February that UnitedHealth’s Optum has plans to acquire comprehensive in-home care organization Landmark for an enterprise value of $3.5 billion.
Adding Landmark would assuredly complement Optum’s “Housecalls” program and existing “Optum At-Home” infrastructure. The company’s advanced practice clinicians plan to conduct 2 million in-home visits in 2021.
Like Cordani, Wichmann touched on the value of the home during UnitedHealth’s Q4 earnings call.
“Seniors choose our offerings because of the value they receive, better health outcomes and experiences at lower costs,” he said. “We have also been enhancing our offerings to better meet expectations about how people want to live their lives, focusing on more digital and physical care resources in the home, expanding our one-on-one concierge navigation services, and enabling the home as the safest and more effective setting of care.”
These remarks and seemingly countless others just like them echo that 2018 sense of Manifest Destiny.
It may be a bit later than expected, but 2021 could very well be the year of the “payvidor.”
“Offering a foundational ability to care for people in their homes is essential to developing a health system that is more consumer centric, higher quality and lower cost,” Wichmann said.