Humana to buy out remaining stake in Kindred for $5.7B

Humana building
Humana released its first-quarter earnings report Wednesday morning. (Humana)

Humana is planning to buy out the remaining 60% interest in Kindred at Home in a deal valued at $5.7 billion, accelerating its integration into the insurer's provider services arm.

Humana will purchase the remaining stake from TPG Capital. The insurer currently has a 40% ownership stake in Kindred, valued at $2.4 billion. The insurer said buying out the remaining interest in Kindred will allow it to more quickly scale up its plans to launch value-based care models and innovative care.

“We continue to invest in assets that allow Humana to better manage the holistic needs of our members and patients by expanding care in the home, including primary care, telehealth, and emergency room care, while also addressing social determinants of health,” Bruce Broussard, Humana's CEO, said in a statement.

“Since our initial investment in Kindred at Home, in partnership with the Sponsors and Kindred at Home management, we’ve learned a great deal about the home health space and recognize the significant value we can deliver to members and patients by integrating this asset into our holistic approach to care," Broussard said. "Fully integrating Kindred at Home will enable us to more closely align incentives to focus on improving patient outcomes and on reducing the total cost of care. This is critical to deploying at scale a value-based, advanced home health model that makes it easier for patients and providers to benefit from our full continuum of home-based capabilities, leveraging the best channel to deliver the right care needed at the right time.”

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Kindred at Home's home health operations will be folded into the insurer's home solutions business, and it will adopt the CareWell branding. Humana launched the new branding earlier this year.

Humana said it plans to maintain only a minority interest in Kindred's hospice and personal care operations and is exploring avenues to facilitate this, including a public listing or another potential deal.

The deal is expected to close in the third quarter of this year, pending regulatory approvals.

Humana beat the Street in the first quarter by posting $828 million in profit.

That represents a 75.1% increase over profits from the first quarter of 2020, which were $473 million, according to the insurer's earnings report released Wednesday.

While Humana surpassed Zacks Investment Research analysts' projections for earnings, the company did fall short of expectations on revenue, posting $20.7 billion in revenue for the quarter. Revenues were up 9.2% over the prior-year quarter, where Humana reported $18.9 billion.

“We’re pleased with the strong start of the year, with solid results across the company, and meaningful progress against our strategy, all while we continue to navigate the pandemic,” said Bruce Broussard, Humana’s CEO, in a statement.

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Humana's Medicare Advantage enrollment was up 12% year over year in the first quarter, the company said, reaching 4.3 million members. That represents a gain of 453,200 beneficiaries compared to the first quarter of 2020.

Humana also said it has gained 328,600 MA members over the course of the quarter, an increase of 8% from Dec. 31, 2020.

The insurer saw its state-based contract membership, which includes dual-eligible demonstration enrollment, increase by 36% compared to the first quarter of 2020, reaching 838,900 members. Humana attributed this in part to the economic impacts of the COVID-19 pandemic.

Broussard said the insurer is now particularly focused on the vaccine rollout, especially around education and outreach.

“In partnership with federal, state and local governments, and with retailers and providers, we’re working to educate our members about the COVID-19 vaccines, ensuring individuals have access to a vaccine, especially those in underserved communities," he said.

Due to the quarterly results, Humana also reaffirmed its outlook for the year. It expects $21.25 to $21.75 in earnings per share and revenues of between $80.3 billion and $81.9 billion.