In April, we covered Humana branding its health services arm to bring together its primary care, pharmacy, and in-home care services under the name CenterWell. While we pontificated on Humana’s dramatic growth, it wasn’t clear at the time how quickly it would grow. Now, just a couple of months later, we feel like we were too conservative in our guesswork.
Pending federal approval, Humana is now set to fully own the home health and hospice business, Kindred at Home, having bought the remaining shares from two private equity partners for $5.7 billion. Let’s write that out to make sure we appreciate all of those zeroes: that’s 5,700,000,000. The deal values Kindred at $8.1 billion, which includes Humana’s existing 40% share, valued at $2.4 billion.
As we’ve noted before, vertical integration is the latest look for health insurers. Why? Well, it comfortably bolsters the bottom line to draw a bunch of related revenue streams under a single umbrella. From the outside, though, thanks to the associated trend of rebranding, it’s getting harder to keep track of all the different stacks in these insurers’ vertical integration channels. Case in point: As this deal goes through, Kindred’s home health business will combine with Humana’s Home Solutions operations and will transition to CenterWell Home Health, under the same rebranding initiative as Humana’s health-services arm. Got all that?
We typically see less aggressive moves from Humana, so we’re paying closer attention to this than we would if it were a power play by, say, UnitedHealthcare or Anthem. Does this continued expansion—which to us mimics that of its peers—reflect a change in Humana’s capacity for aggressive market actions?
We’ve seen the ways in which insurers’ expanding integration and market power can play out as negatives for providers and patients. For example, that time when CVS Health’s insurance arm, Aetna, cut CVS’s retail competitor Walgreen’s out of its network, stranding upwards of 400,000 of its members in “healthcare deserts.” Should we anticipate this kind of behavior from one of the few major insurers that doesn’t have a track record as being particularly anti-provider? We hope not.