Insurance giant Humana (NYSE: HUM) will pay approximately $5.7 billion to take full ownership of the nation’s largest home health provider, Kindred at Home.
The transaction values Kindred at Home at $8.1 billion; Humana holds an existing equity value of $2.4 billion — a 40% stake — through a deal executed in 2017 with private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS).
Tuesday’s announcement comes as capital is flowing into the home health care sector, which experienced a surge in demand during the Covid-19 pandemic. Another recent transaction saw the largest U.S. hospital system, HCA (NYSE: HCA), acquire an 80% stake in the home health and hospice business of Brookdale Senior Living (NYSE: BKD).
By taking full ownership of Kindred at Home, Humana is deepening its investment in becoming a care provider as well as a payer, with a particular focus on the quickly growing older adult population in the United States.
Senior living providers may interpret the Kindred at Home transaction as further proof that large insurers — and Humana in particular — are looking to own more of the care continuum, in order to better control costs and outcomes for their large Medicare Advantage rolls. This strategy could ultimately lead an insurance company to acquire a senior living provider, Eclipse Senior Living CEO Kai Hsiao said in a recent SHN+ TALKS interview.
Last month, Humana introduced the CenterWell brand, “to describe and connect a range of the company’s payer-agnostic health care service offerings.”
CenterWell launched with senior-focused care centers that formerly operated under the Partners in Primary Care and Family Physicians Group brands.
“The value-based medical centers offer seniors a primary care physician who looks at the big picture of a patient’s health, develops personalized health care plans and helps coordinate the patient’s journey through the health care system,” Humana stated in the press release announcing CenterWell.
Similar senior-focused care centers have experienced explosive growth in recent years, as they have proven their ability to better manage costs and outcomes for Medicare Advantage payers, while driving consumer satisfaction and wellbeing. Some, such as those operated by Cano Health, Oak Street Health and Geisinger, have formed partnerships with senior living providers or have expressed interest in doing so.
But, such centers also present a potential threat to senior housing providers, insofar as they could enable older adults to avoid moves to communal living.
Going forward, Kindred at Home will fall under the CenterWell umbrella, as CenterWell Home Health. And, Humana intends to further “accelerate clinical innovation” to deliver more care in the home.
There may be limits to how much of the continuum Humana wants to own. The company intends to divest a majority stake in Kindred at Home’s hospice and community care operations.
“Humana has been successful in delivering the desired patient experience and outcomes through partnership models,” the insurer said of this decision, in Tuesday’s press release.
The acquisition of Kindred at Home is expected to close in the third quarter of 2021.
Go deeper with analysis from SHN+: