Report: Humana in talks to buy part of home-health and hospice giant Kindred Healthcare

Humana—which has shown signs it's preparing for a sale—is also reportedly in talks to make a purchase of its own.

The Louisville, Kentucky-based insurer is in advanced discussions with two private equity firms to acquire Kindred Healthcare, the biggest home-health and hospice operator in the country, according to The Wall Street Journal. Including its debt, Kindred has an enterprise value of about $4 billion.

In the potential deal, Humana would acquire Kindred’s home- and hospice-care operation, while the firms Welsh Carson Anderson & Stowe and TPG would take control of its facilities business, which includes about 77 long-term care hospitals and 19 rehabilitation hospitals, the article added.

If the transaction does happen, it will be just the latest to pair a health insurance company with a noninsurer. Not only has CVS announced it plans to acquire Aetna, but UnitedHealth’s Optum subsidiary has also been buying up clinical businesses like Surgical Care Affiliates and most recently, DaVita Medical Group. Optum is also buying the healthcare business of The Advisory Board, which offers research, technology and consulting services to major provider organizations.

The move would also complement Humana’s increasing focus on home-based healthcare, which it sees as a vehicle to improve care quality and lower costly hospital admissions for its Medicare Advantage members. Its Humana At Home division already offers care management, skilled nursing, home-care and other in-home support to 1 million chronically ill and disabled individuals, per the company’s website.

Expanding upon that strategy, Humana CEO Bruce Broussard said during the company’s most recent earnings call, “will require M&A and other partnerships” to make additional capabilities possible.

Because Humana’s potential deal with Kindred would be small and consistent with the insurer’s core strategy, it doesn’t necessarily preclude Humana from being acquired, according to Leerink Partners analyst Ana Gupte, Ph.D. She previously predicted that the most likely buyers would be Cigna, Walmart or Walgreens.

Indeed, there have been multiple signs that Humana is preparing for a larger deal, including the sell-off of its long-term care insurance subsidiary, workforce reductions and an update to its change-in-control policy, which dictates the severance packages that executives would get if they’re terminated following the sale of the company.

Aetna previously tried to purchase Humana, but the deal fell through after federal antitrust regulators won a court case that challenged the deal on antitrust grounds. The two companies officially ended their merger agreement this past February.