Humana Announces Agreement to Acquire a 40 Percent Minority Interest in Kindred’s Homecare Business for Approximately $800 Million Through a Joint Venture with an Entity Owned by TPG Capital and Welsh, Carson, Anderson & Stowe
- Provides Humana an ownership interest in the nation’s largest home health operatorand complements Humana’s existing Humana At Home care coordination capabilities
- Kindred’s homecare business has the broadest geographic coverage in its sector with approximately 65 percent overlap with Humana membership
- Advances Humana’s integrated care delivery strategy to make it easier for members to engage in their health by providing care to seniors living with chronic conditions in their home, a member preferred lower cost setting
- Minority ownership allows Kindred’s homecare business to continue to grow as an independent company while Humana provides capabilities to transform the home health model to a value-based care platform
- Put/call structure provides Humana a path to full ownership of Kindred’s homecare business in three to five years with an exercise price determined, in part, by the achievement of certain clinical outcomes
- Humana’s strategic and economic interest is exclusively in Kindred’s homecare business, enabling focus on driving business transformation and maximizing platform agility
As announced today,
Humana believes that a key component of the next generation of its integrated care delivery model is the ability to provide care to consumers, including Humana members, in their home, meeting them where they want to be, in a preferred lower cost setting. This transaction will help Humana manage the chronic conditions of its members and others it serves and provide an additional avenue for the company to address activities of daily living, medication adherence and other health determinants, reinforcing its commitment to managing health holistically, not episodically.
“The acquisition of a minority interest in Kindred at Home, the largest home health company in the country with significant overlap with Humana membership, brings to us an experienced, well-respected home health provider with robust access to extensive clinical capabilities that will allow us to accelerate our strategy to more deeply integrate with our members’ lifestyles,” said
This transaction will provide the company with extensive geographic coverage, with approximately 65 percent overlap with Humana’s individual
“The combination of Humana At Home’s pursuit of improving care for seniors living with chronic conditions, in concert with Kindred At Home’s care delivery, will allow these important capabilities to create more effective care in a compassionate way for our members,” said
The agreement with the Sponsors includes a put option under which they have the right to require Humana to purchase their interest in the joint venture starting at the end of year three and ending at the end of year four post close. Consideration upon exercise of the put option per the agreement would be valued at an exit multiple of 10.5 times the preceding twelve months earnings before interest, income taxes, depreciation and amortization, or EBITDA, subject to certain adjustments and other provisions customary for transactions of this nature. In addition, the multiple is subject to adjustment up to 11.5 times EBITDA based on the achievement of certain pre-defined value-based outcomes tied to clinical metrics. The 11.5 times EBITDA exit multiple is comparable to the valuation for Humana’s 40 percent interest. Finally, Humana has a call option under which it has the right to require the Sponsors to sell their interest in the joint venture to Humana beginning at the end of year four and ending at the end of year five post close for cash consideration using the same valuation methodology applicable to the previously discussed put option consideration.
“We are pleased with our unique partnership with the Sponsors in Kindred at Home, which is aligned around value-based care with incentives designed to drive improved outcomes for the people we serve,” said
These transactions, which are anticipated to close in the summer of 2018, are subject to customary state and federal regulatory approvals, including approval by the stockholders of Kindred and the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, as well as other customary closing conditions. Humana expects to fund the transaction through the use of parent company cash and will account for its minority investment under the equity method. The company does not anticipate a material impact to earnings in 2017 from this pending transaction. Given that Humana’s previous financial commentary for the year ending
Cautionary Statement
This news release includes forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases,
These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the “Risk Factors” section of the company’s
- If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of healthcare services delivered to its members, if the company is unable to implement clinical initiatives to provide a better healthcare experience for its members, lower costs and appropriately document the risk profile of its members, or if its estimates of benefits expense are inadequate, Humana’s profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. The company continually reviews estimates of future payments relating to benefit expenses for services incurred in the current and prior periods and makes necessary adjustments to its reserves, including premium deficiency reserves, where appropriate. These estimates, however, involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in claim payment patterns and medical cost trends, so any reserves the company may establish, including premium deficiency reserves, may be insufficient.
- If Humana fails to effectively implement its operational and strategic initiatives, particularly its
Medicare initiatives, state-based contract strategy, and its participation in the new health insurance exchanges, the company’s business may be materially adversely affected, which is of particular importance given the concentration of the company’s revenues in these products. In addition, there can be no assurances that the company will be successful in maintaining or improving its Star ratings in future years. - Certain proposed transactions, including the divestiture of Humana’s subsidiary,
KMG America Corporation , and the acquisition of a minority interest inKindred Healthcare , Inc.’s Kindred at Home division by Humana, are subject to various closing conditions, including various regulatory approvals and customary closing conditions, as well as other uncertainties, and there can be no assurances as to whether and when these transactions may be completed. - If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, to protect Humana’s proprietary rights to its systems, or to defend against cyber-security attacks, the company’s business may be materially adversely affected.
- Humana is involved in various legal actions, or disputes that could lead to legal actions (such as, among other things, provider contract disputes relating to rate adjustments resulting from the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, commonly referred to as “sequestration”; other provider contract disputes; and qui tam litigation brought by individuals on behalf of the government) and governmental and internal investigations, any of which, if resolved unfavorably to the company, could result in substantial monetary damages or changes in its business practices. Increased litigation and negative publicity could also increase the company’s cost of doing business.
- As a government contractor, Humana is exposed to risks that may materially adversely affect its business or its willingness or ability to participate in government healthcare programs including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government determined payment rates, potential restrictions on profitability, including by comparison of profitability of the company’s
Medicare Advantage business to non-Medicare Advantage business, or other changes in the governmental programs in which Humana participates. - The Healthcare Reform Law, including The Patient Protection and
Affordable Care Act and The Healthcare and Education Reconciliation Act of 2010, could have a material adverse effect on Humana’s results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, restricting the company’s ability to expand into new markets, increasing the company’s medical and operating costs by, among other things, requiring a minimum benefit ratio on insured products, lowering the company’sMedicare payment rates and increasing the company’s expenses associated with a non-deductible health insurance industry fee and other assessments; the company’s financial position, including the company’s ability to maintain the value of its goodwill; and the company’s cash flows. Additionally, potential legislative changes, including activities to repeal or replace, in whole or in part, the Health Care Reform Law, creates uncertainty for Humana’s business, and when, or in what form, such legislative changes may occur cannot be predicted with certainty. - Humana’s continued participation in the federal and state health insurance exchanges, which entail uncertainties associated with mix, volume of business and the operation of premium stabilization programs that are subject to federal administrative action, could adversely affect the company’s results of operations, financial position and cash flows.
- Humana’s business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their manner of application could increase the company’s cost of doing business and may adversely affect the company’s business, profitability and cash flows.
- If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company’s business may be adversely affected.
- Humana’s pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
- Changes in the prescription drug industry pricing benchmarks may adversely affect Humana’s financial performance.
- If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana’s gross margins may decline.
- Humana’s ability to obtain funds from certain of its licensed subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings, should they occur, may adversely affect its business, results of operations, and financial condition.
- The securities and credit markets may experience volatility and disruption, which may adversely affect Humana’s business.
In making forward‐looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward‐looking events discussed herein may or may not occur. There also may be other risks that the company is unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward‐looking statements.
Humana advises investors to read the following documents as filed by the company with the
- Form 10‐K for the year ended
December 31, 2016 ; - Form 10-Q for the quarter ended
March 31, 2017 ,June 30, 2017 ,September 30, 2017 ; and - Form 8‐Ks filed during 2017.
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About TPG
TPG is a leading global alternative asset firm founded in 1992 with more than
About
WCAS focuses its investment activity in two target industries: technology and healthcare. Since its founding in 1979, WCAS has organized 16 limited partnerships with total capital of over
About Humana
To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions – combine to produce a simplified experience that makes health care easier to navigate and more effective.
More information regarding Humana is available to investors via the Investor Relations page of the company’s website at humana.com, including copies of:
- Annual reports to stockholders;
Securities and Exchange Commission filings;- Most recent investor conference presentations;
- Quarterly earnings news releases and conference calls;
- Calendar of events; and
- Corporate Governance information.
Additional Information and Where to Find It
Kindred will file with the
View source version on businesswire.com: http://www.businesswire.com/news/home/20171219005620/en/
Source:
Humana Investor Relations
Amy Smith, 502-580-2811
Amysmith@humana.com
or
Humana Corporate Communications
Tom Noland, 502-580-3674
Tnoland@humana.com