Humana takes 40% stake in Kindred as part of $4B deal

Health insurer Humana and two private equity firms have announced a $4 billion acquisition of the largest home health and hospice operator in the U.S., Kindred Healthcare, splitting the company into two units and expanding Humana’s reach into patient care.

Humana and the two firms—TPG and Welsh, Carson, Anderson & Stowe—will pay $9 per share in cash for Kindred. Humana itself is paying $800 million for a 40 percent stake in the segment taking over Kindred’s home health and hospice care business. The second unit, consisting of Kindred’s 77 long-term acute care hospitals and 19 rehabilitation centers, wouldn’t involve Humana and would be operated by the private equity firms.

In a press release, Humana said the move will help its members with chronic conditions more easily receive care at home.

“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,” Humana CEO and President Bruce Broussard said in a statement. “We are excited about the opportunity this acquisition provides to advance our vision for integrated care delivery, as we continue to deliver our Humana At Home capabilities while building a transformative platform for the future.”

As part of the deal, the private equity firms can require Humana to buy the remaining 60 percent in the home health and hospice business after three years.

The acquisition aligns with Humana’s population health strategy centering around its Medicare Advantage membership, with it said will have “65 percent overlap” with these new home health services after this transaction.

“We look forward to transforming post-acute care through a value-based approach that will deliver improved clinical outcomes, ultimately lowering medical costs,” said Humana’s president of healthcare services, William Fleming. “We believe this work will lead to reduced hospitalizations, reduced emergency room visits and allow physicians and clinicians to extend their care all the way to the patient’s home.”

The move mirrors other recent moves by Humana’s insurance rivals which have begun to blur the lines between insurers and providers. Aetna—Humana’s one-time merger partner—is the target of a $69 billion acquisition by CVS Health, while UnitedHealth Group’s Optum unit has continued expanding into care delivery with a $4.9 billion purchase of DaVita Medical Group and a $2.3 billion deal to buy Surgical Care Affiliates.

Kindred itself had been scaling back its business over the past year, announcing in Nov. 2016 it would divest of its 91 nursing homes, its smallest business segment.