Humana Will Buy One Primary Care Group — and Could Snap Up Another

by Peter Johnson

 

Humana Inc. will spend between $450 million and $550 million in debt and cash to gain full control of a group of primary care clinics that it launched with private equity firm Welsh, Carson, Anderson and Stowe (WCAS), and company executives said during the firm’s recent investor day that Humana plans to double down on its existing primary care M&A strategy. Health care finance experts tell AIS Health that insurers’ spending spree on providers is only likely to accelerate, but that Humana is in pole position to benefit from deep investments in Medicare Advantage-focused primary care.   Health insurers have plenty of cash The Humana news is proof of “how much money these groups have in cash,” Dustin Thompson, vice president at investment bank Provident Healthcare Partners, tells AIS Health.   The lending and spending sprees are likely to continue indefinitely, as experts believe that health insurers are well-positioned to withstand any macroeconomic shocks to the broader economy.   The Wall Street Journal on Sept. 22 reported that Humana “and other possible buyers” were “circling” Humana joint venture partner Cano Health Inc., causing the primary care provider’s stock to jump 42% that day. Bloomberg reported the same day that CVS Health Corp., which is also spending billions on provider M&A, is also interested in Cano.  Humana is focused on primary care Humana has strong ties to WCAS, revealing earlier this year that it struck a $1.2 billion deal for a brand-new primary care clinic partnership with the private equity fund. This month’s $450 million-plus deal is just the latest development in a previous joint venture, which staked $800 million between the two companies to develop 67 primary care clinics by early 2023.  As Humana CEO Bruce Broussard pointed out during the investor day, the firm is already “the largest provider of senior-focused primary care [and] the largest provider of home health services” in the U.S., and is pursuing “growth, momentum and emerging scale” in both categories.   Broussard said that the firm’s CenterWell-branded care delivery subsidiaries are “poised to become increasingly important contributors to earnings growth,” as CenterWell clinics are payer-agnostic and seek out new patients. Thompson adds that the deal and Humana’s broader primary care moves are a play to take as big a share as possible of each Medicare reimbursement dollar they administrate.  The latest deal “goes to Humana’s foresight in what is occurring, and their belief that there is a large opportunity here in controlling [the WCAS joint venture], and by controlling it outright, they’re going to take advantage of that opportunity. There’s been increased competition with other groups entering that space.” The massive investments this year show that Humana “in reality probably didn’t want to be left behind” the competition, he adds.

 

From Health Plan Weekly

 

Subscribers may read the in-depth article online. Learn more about subscribing to AIS Health's publications.