Humana Inc. (NYSE: HUM) has agreed to sell 60% of its hospice and personal care assets from Kindred at Home to the private equity firm Clayton Dubilier & Rice (CDR).
The deal is expected to close in the third quarter of this year. And its surrounding details are of interest for multiple reasons.
The first is the the price tag: $2.8 billion for only part of Kindred’s hospice and personal care business.
It’s also intriguing that the Louisville, Kentucky-based Humana decided to hold onto 40% of those assets for now. Moving forward, the company says it feels comfortable relying on partnerships in personal care and hospice.
“While palliative and hospice services are important components in the continuum of care that Humana offers patients, we are confident that we can deliver desired patient outcomes and improved customer experiences through partnership models rather than fully owning KAH Hospice,” Humana CFO Susan Diamond said in a statement.
Diamond also noted that Humana considered and explored a “broad range of alternatives,” but ultimately landed on the partial sale to CDR – a buyer that is another noteworthy part of the deal.
Yet another private equity firm is diving head first into home-based care and adjacent spaces. CDR’s portfolio includes, among many others, agilon health (NYSE: AGL), a value-based primary care company; Vera Whole Health, a value-based population health care provider; and Healogics, a wound care company.
CDR also formerly invested in naviHealth, which is now owned by UnitedHealth Group’s Optum.
“With CD&R’s established physician relationships, value-based care expertise and record of providing strategic capital to a wide range of businesses, we are certain that these divisions are well-positioned for success under the joint ownership of Humana and CDR,” Diamond said.
Between the UnitedHealth Group (NYSE: UNH)-LHC Group Inc. (Nasdaq: LHCG) deal and this one, there have been two multi-billion dollar purchases in home care, home health and hospice in less than a month. And who knows what could ultimately happen with Enhabit Home Health & Hospice, the former Encompass Health (NYSE: EHC) business segment.
Whether it’s a trend – or just an anomalous period of time – remains to be seen, Les Levinson, co-chair of the transactional health care practice at Robinson & Cole LLP, told Home Health Care News.
“I think we’re all going to just keep our eyes open to see if this is the beginning of a trend,” Levinson said. “A trend where you’re seeing these transactions happening, and happening more frequently. These transactions clearly stand out due to their financial terms, with numbers that are different than ones we’ve been seeing before.”
Humana initially acquired part of Kindred at Home in 2018. Three years later – in April of last year – it acquired the rest. Kindred at Home is one of the largest home health providers in the country, if not the largest. The transition from the Kindred brand to Humana’s “CenterWell” brand is currently underway.
Immediately after that deal, which was worth $8.1 billion in terms of enterprise value, Humana announced that it would be looking to divest Kindred’s hospice and personal care assets, viewing them as non-essential to a home-based, value-based strategy.
But Humana is, again, maintaining that 40% stake.
“[Humana] still has a fairly sizable minority stake here,” Levinson said. “It’s hedging its bet a little bit and keeping a foot in the door. They say that they want to be collaborative with others, but at the same time, they’re keeping a hand on the wheel.”
From Humana’s perspective, the deal also obviously brings in something valuable: cash. Despite that, it’s possible that CDR may have gotten a relatively good deal, given other home health and hospice company valuation comparisons currently.
“They’re able to bring in a bunch of cash and improve their balance sheet, while still maintaining a sizable minority investment,” Levinson said. “They may have felt, given current valuations, that it was a good time to sell. Usually when you hold out to get the best possible price [for an asset], it doesn’t usually work out. Selling at an attractive price profit is not a bad strategy.”
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