Amidst rumors that the insurer itself could be bought by a retail giant, Humana is again joining with 2 financial firms to expand its palliative holdings.
The Humana Building (foreground) in Louisville, Kentucky. Photo courtesy Wikimedia Commons user Justin Cozart.
Humana, one of the largest insurance providers in the United States, is again teaming up with a group of investment firms to snap up a health services company.
This week, the insurer announced that TPG Capital (TPG) and Welsh, Carson, Anderson & Stowe (WCAS) would join in the $1.4 billion purchase of Curo Health Services, a company that provides hospice care more than 20 states.
In Curo, the 3 investors see “a highly capable management team and a tech-enabled, centralized model for hospice care” that presents them the opportunity “to be a leader in managing the continuum of home health, palliative care and hospice in an integrated fashion.” The announcement goes on to champion an integrated, analytics-based model that will allow them to “modernize, enhance and transform home healthcare in America.”
It’s the second time that the 3 firms made a combined offer on a home care organization in the last 6 months. In December 2017, they put $4.1 billion down on a similar company, Kindred Healthcare. The goal is to split Kindred, creating a new Kindred at Home division which Humana would initially own 40% of, with plans to purchase the rest from TPG and WCAS at a later date.
According to today’s announcement, Humana would also take 40% ownership of Curo health Services, and they expect the deal to close this summer.
The Kindred offer was met with opposition from at least one stakeholder. A week after it was announced, Brigade Capital—which owns close to 6% of Kindred Healthcare—wrote a letter to the Securities Exchange Commission arguing that the price “does not come close to maximizing shareholder value, is not in the best interests of shareholders, and should not be approved by Kindred’s owners.”
Despite objections, that transaction is reportedly nearing completion, and the new Curo deal “is expected to occur after the closing of Kindred at Home,” although it is not conditioned upon the closing of that move.
The announcement comes during a time of heightened speculation about consolidation in the healthcare industry. The lines between provider, payer, pharmacy, and private capital have become increasingly blurred as retail drug giant CVS Health works to buy leading insurer Aetna and Cigna tries to convince the Department of Justice that its offer on pharmaceutical distributor Express Scripts would not lead to anticompetitive behavior.
Meanwhile, Humana itself has come up as a potential target for brick-and-mortar retail monolith Walmart. The ubiquitous superstore is CVS’s main competition in the physical pharmacy space, and Humana jockeys with Aetna for the largest slices of the American insurance market.