Humana Acquiring Remaining 60% Interest in Kindred at Home

LOUISVILLE, Ky. (April 29, 2021)—Humana Inc. (NYSE: HUM) announced it has signed a definitive agreement to acquire the remaining 60% interest in Kindred at Home (KAH), the nation’s largest home health and hospice provider, from TPG Capital (TPG), the private equity platform of global alternative asset firm TPG, and Welsh, Carson, Anderson & Stowe (WCAS), a private equity firm focused exclusively on the healthcare and technology industries, for an enterprise value of $8.1 billion, which includes Humana’s existing equity value of $2.4 billion associated with its current 40 percent minority ownership interest.

KAH employs approximately 43,000 caregivers providing home health, hospice and community care services to over 550,000 patients annually. KAH has locations in 40 states, providing extensive geographic coverage with approximately 65% overlap with Humana’s individual Medicare Advantage membership.

This acquisition reflects Humana’s continued commitment to investing in home-based clinical solutions that drive improved patient outcomes, increased satisfaction for patients and providers and value for health plan partners. Over the last year, Humana, together with KAH management, took significant ground in continuing to prove out home-based care models’ impact on preventable events and assembling supporting clinical capabilities ranging from preventive to higher acuity, emergent, hospital-level care. Underpinning these clinical advancements was the development of a platform to share and analyze information between the health plan and home health agency, facilitating the delivery of proactive and individual care plans. This approach delivers personalized, and more comprehensive whole person care and supports care continuity by engaging in-home physician and urgent care resources when a patient does not have immediate access to a primary care physician or if symptoms need immediate escalation.

Acceleration of the KAH acquisition provides Humana the opportunity to more quickly implement and scale the value-based models and clinical innovation it has designed, focusing on total cost of care and delivering outcomes and value beyond what is possible in a traditional, fee for service model.

“We continue to invest in assets that allow Humana to better manage the holistic needs of our members and patients by expanding care in the home, including primary care, telehealth, and emergency room care, while also addressing social determinants of health,” said Bruce D. Broussard, Humana’s president and CEO. “Since our initial investment in Kindred at Home, in partnership with the sponsors and Kindred at Home management, we’ve learned a great deal about the home health space and recognize the significant value we can deliver to members and patients by integrating this asset into our holistic approach to care. Fully integrating Kindred at Home will enable us to more closely align incentives to focus on improving patient outcomes and on reducing the total cost of care. This is critical to deploying at scale a value-based, advanced home health model that makes it easier for patients and providers to benefit from our full continuum of home-based capabilities, leveraging the best channel to deliver the right care needed at the right time.”

“We have been proud to work with management and our partners to invest behind and build best-in-class clinical care at Kindred at Home,” said Jeff Rhodes, partner at TPG. “Through our collective partnership, we have established innovative care pathways that prioritize value on behalf of patients while enabling a more seamless and integrated care experience.”

“Kindred at Home represents the collaboration between the company’s management team, WCAS and our partners to build the nation’s leading home health and hospice platform,” said Ed Sobol, general partner at WCAS. “The company consistently delivers outstanding patient experience and outcomes at lower overall cost.”

As part of the transaction, KAH’s home health operations will be integrated into Humana’s Home Solutions business led by Susan Diamond, Segment President. When combined with KAH, Humana’s Home Solutions geographic scale and clinical breadth provides the opportunity to offer care beyond Humana members. As a result, KAH will adopt Humana’s new payer-agnostic healthcare services brand – CenterWell – transitioning to CenterWell Home Health.

Hospice and personal care services continue to be important offerings in the full continuum of care Humana intends to offer patients. However, Humana has been successful in delivering the desired patient experience and outcomes through partnership models, including through participation in the Centers for Medicare and Medicaid Services (CMS) hospice Value-Based Insurance Design (VBID) model. Therefore, while KAH’s hospice and community care operations are included in the transaction, Humana intends to ultimately only maintain a minority interest in this portion of the asset. The company is exploring, among other things, a public listing, conditions permitting, or another potential transaction, and intends for the future independent company to be led by David Causby, the current Chief Executive Officer of Kindred at Home. There is no assurance about the timing and certainty of any such transaction.

”Humana embarked on a journey with Kindred at Home in 2018 with the belief that a key component of the next generation of its integrated care delivery model was the ability to provide care to consumers, including Humana members, in their home at scale, meeting them where they want to be, in a preferred lower cost setting, while also recognizing that the traditional volume-based, fee-for-service model limited innovation in home health,” said Susan Diamond, Humana’s Segment President—Home Business. “Our work with Kindred at Home allowed us to learn more about the advanced clinical models needed, proved that we can execute on the needed innovation, demonstrated that we can drive penetration and gave us confidence we can support a higher acuity patient by leveraging the other home-based assets and capabilities we’ve assembled. Kindred at Home continues to demonstrate superior patient outcomes, including reduced hospitalizations, readmissions, and ER utilization even as their penetration of Humana episodes increased from 8 percent to 19 percent in markets with geographic overlap.”

This acquisition, which is expected to close in the third quarter of 2021, is subject to customary state and federal regulatory approvals. Humana expects to fund the approximately $5.7 billion transaction (net of Humana’s existing equity stake) through a combination of parent company cash and debt financing. The company does not anticipate a material impact to earnings in 2021 from this pending transaction. Humana expects the transaction to provide modest additional financial flexibility for 2022.

Goldman Sachs & Co. LLC is acting as financial advisor to Humana. Fried, Frank, Harris, Shriver & Jacobson LLP and Manatt, Phelps & Phillips LLP are acting as legal advisors to Humana. Barclays and Guggenheim Securities, LLC are acting as financial advisors to Kindred at Home. Debevoise & Plimpton and Mintz are acting as legal advisors to Kindred at Home.

Humana management will discuss this transaction during their first quarter 2021 (1Q21) earnings call on Wednesday, April 28, 2021 at 9:00 a.m. Eastern time. A webcast of the 1Q21 earnings call may be accessed via Humana’s Investor Relations page at humana.com.