Humana will cut nearly $1 billion from its business after increased competition led the insurer to lose half the new Medicare Advantage members it expected to gain during open enrollment.
The nation's second-largest Medicare Advantage carrier will invest in automation to more efficiently run its business, increase commissions paid to outside sales reps, grow its home health and primary care services and cut non-essential business lines, including axing some portions of its real estate and its hospice business, said President and CEO Bruce Broussard.
The insurer ended the year with 9.8 million members, with Medicare Advantage accounting for nearly half, or 4.9 million, of the payer's enrollees.
Three-quarters of the $1 billion will come from cutting costs, while the other 25% will likely come from value creation opportunities, executives said. Humana is already working with outside consultants to find ways to streamline its operations.
"We are pushing the organization to be more efficient," Broussard told investors during the fourth-quarter earnings call. "This is a much larger effort for us as an organization, we feel that we have significant opportunity to do it."
Areas that will likely be trimmed are the insurer's 90,000 person workforce–which Broussard aims to "optimize" although he did not specify layoffs–the company's vendor spend and Humana's hospice services, which it acquired as part of its $8.1 billion deal to buy the nation's largest home health provider Kindred at Home. Humana is reportedly seeking $3 billion for the hospice business and is working with Goldman Sachs to find private equity buyers. Broussard said he expected to provide more details on the sale during the company's first quarter earnings call.The insurer, meanwhile, will look to grow its primary care and home health investments. Humana has been in the process of consolidating its primary care services under one arm, and ended last calendar year with 206 CenterWell and Conviva centers. The company recently hired a new head of this division and aims to end this year with up to 260 centers, some of which are backed through a partnership with private equity group Welsh, Carson, Anderson & Stowe. Looking to 2023 and beyond, Humana plans to build or acquire up to 50 new centers per year.