Humana Doesn’t Expect Large-Scale M&A Activity Post-Kindred, Still Plans to Divest Hospice Assets

Humana Inc. (Nasdaq: HUM) has been one of the key home health players to watch over the past few years, an idea best illustrated by its full takeover of Kindred at Home last year.

The Louisville, Kentucky-based health care company expects to be less active on the home health M&A front moving forward, however. After figuring out what to do with Kindred at Home’s hospice business, Humana’s interest will likely revolve around primary care opportunities, according to CFO Susan Diamond.

“What we continue to prioritize are assets within our primary care space, potentially some within the home space,” Diamond said Tuesday at the Barclays Global Healthcare Conference. “But we’d expect those to be smaller to sort of mid-size tuck-in opportunities that allow us to get greater scale more quickly, again, with an emphasis on primary care.”

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Humana purchased its remaining stake in Kindred at Home from TPG Capital and Welsh, Carson, Anderson & Stowe for $5.7 billion. It finalized the transaction – the largest in Humana’s history – in August.

Since that time, the company has been focused on further moving Kindred’s home health operations into the value-based care world, though it likewise plans to continue growing the traditional fee-for-service model as well.

“As seniors increasingly choose Medicare Advantage, there is a meaningful opportunity for home health organizations to engage differently with patients and Medicare Advantage payers to more holistically address patient needs and improve health outcomes, reduce the total cost of care for health plans, and share appropriately in this value creation,” Humana noted in its 2021 annual report.

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In addition to its value-based care focus, Humana has begun a major rebranding of Kindred’s home health operations.

On March 1, Kindred home health locations in seven states – Washington, Oregon, Idaho, Nevada, Arizona, New Mexico and North Carolina – rebranded to “CenterWell Home Health.” Locations in other states will be phased into CenterWell as 2022 progresses.

Once the initiative is finished, CenterWell Home Health will support patients from more than 350 locations across 38 states, according to Humana.

Source: Humana

The hospice, palliative, community and personal care divisions of Kindred at Home are not part of the rebranding push.

With hospice, Humana remains committed to exploring divestiture opportunities, Diamond, the former leader of Humana home business segment, said.

“We’ve said publicly, we do think that it makes sense for us to divest of our majority position in hospice,” she said. “As we said, we hope to have a more meaningful update to provide you in terms of timing and likelihood on our first quarter call and a few weeks.”

Axios in January reported that Humana had started a divestiture process in collaboration with Goldman Sachs targeting private equity suitors. Diamond did not discuss that report while speaking at the Barclays event.

“We continue to actively pursue strategies [to divest], believing that strategically we don’t need to own that asset,” Diamond said. “That frees up some of that capital to de-lever and give us more capacity to do potentially other strategic M&A, beyond what we have the capacity for currently.”

While the CFO suggested Humana will be focused on primary care, she did leave the door open for possible home health M&A, if there are opportunities to add home health locations in “zones and geographies where Kindred maybe doesn’t have coverage.”

Even then, though, that would likely come in the form of smaller tuck-in deals.

“What we’ve said consistently is that near term, we would not expect large-scale M&A,” Diamond emphasized. “It’s not to say we wouldn’t look at it if an opportunity presented itself, but our near-term focus is less about larger-scale M&A.”

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