Rumored Humana-Kindred deal would bolster home-based care
Health insurer Humana is reportedly in talks to buy acute-care provider Kindred Healthcare, in what's another in a recent string of deals pairing insurers with healthcare providers. The deal would vastly strengthen Humana's presence in home healthcare, giving the insurer a lever to keep patients away from the hospital and lower its medical claims costs.
Sound familiar? Other mergers and acquisitions between insurers and providers announced in recent weeks also aim to shift care away from hospitals and reduce medical spending. Take CVS and Aetna, which are combining in a deal that hopes to position CVS' retail stores and medical clinics at the center of patients' care routines.
And earlier this month, UnitedHealth Group's Optum unit struck a deal to buy dialysis giant DaVita's physician group, which operates urgent-care and outpatient surgery centers, where patients can seek healthcare services for a much lower price tag than they would get in an inpatient setting. UnitedHealth has long been shifting patient care to outpatient facilities. Other insurers are just playing catch up.
So it's natural that Humana, which is one of the relatively smaller national insurance companies with $54.4 billion in annual revenue, would look for a partner, especially after its proposed merger with Aetna fell through at the start of this year.
Under the deal, Humana and two private equity firms, Welsh Carson Anderson & Stowe and TPG, would divide Louisville, Ky.-based Kindred, according to the Wall Street Journal, which first reported the deal on Sunday. The private equity firms would take over Kindred's long-term care facilities, and Humana with the private equity firms would get the company's home healthcare and hospice business.
A spokesman for Humana did not respond to a request for comment.
There's a clear benefit to Humana. "Home healthcare gets the patient out of expensive inpatient facilities, so (Humana) can have more control over the lives of their patients and encourage them to use home health as an alternative to more expensive forms of care, like nursing homes or hospitals," explained Allen Fisher, managing director at MUFG.
While he said the deal would likely lower healthcare costs, it's unclear if those savings would trickle down to patients.
Kindred is the nation's largest operator of post-acute facilities in home and hospice care, rehabilitation services and long-term acute care. Its 2016 revenue totaled $7.2 billion. Its home and hospice care segment, which is the part of the company that Humana would reportedly take over, brought in $2.5 billion of that. The company boasts 635 home health, hospice and non-medical home care sites of service.
Humana this year has been investing heavily in the provider side of healthcare, in hopes of improving the medical experience and outcomes of its members. That includes investing in medical clinics—the insurer launched 15 new clinics in 2017—and home healthcare.
"We continue to be very focused on the home, as home is often a superior clinical environment to deliver care and reduce high-cost hospital admissions," Humana CEO Bruce Broussard told investors in November.
He told investors that the insurer was working with its existing home health agencies to figure out how to improve the care model, which he said is often disconnected from primary care. He hinted that mergers and acquisitions would be necessary to bring Humana's vision of improved home healthcare to life.
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