Humana and Private Equity Firms Buy Kindred Healthcare

Humana and Private Equity Firms Buy Kindred Healthcare

This morning, it was announced that United States health insurer Humana Inc., along with two private equity firms (TPG Capital and Welsh, Carson, Anderson & Stowe), has purchased home health and long term care operator Kindred Healthcare for $4 billion. Humana and the two firms will each pay $9 per share (a 4.7 percent premium over the stock’s Friday close) in cash for the the home health care provider and hospice operator, and the company will be split into two parts.

Specifically, Humana has paid $800 million for a 40 percent stake in Kindred at Home, which is Kindred’s home health care segment that contains 40,000 caregivers with approximately 130,000 patients each day. Humana will not have any stakes in Kindred’s other unit, which is geared towards rehabilitation and long-term care. That segment will be taken over by the private equity firms.

As the nation’s fourth-largest health insurer, Humana has spent the past year investing in the provider side of healthcare as a means of bettering its members’ medical experience and outcomes. They have primarily achieved this through investigating in home healthcare and medical clinics; in fact, they have launched 15 new clinics this year alone. In November, Humana’s CEO Bruce Broussard said to investors, “We continue to be very focused on the home, as home is often a superior clinical environment to deliver care and reduce high-cost hospital admissions.” He continued to state that Humana is working with its current home health care agencies to improve the care model in order to better connect it to primary care.

This acquisition will benefit Humana as well as patients at their facilities. Allen Fisher, managing director of MUFG, said, “Home healthcare gets the patient out of expensive inpatient facilities, so [Humana] can have more control over the lives of their patients and encourage them to use home health as an alternative to more expensive forms of care, like nursing homes or hospitals.”

This is not the first deal of this nature. Aetna Inc. and UnitedHealth Group Inc., two competitors, have also recently announced deals to expand their reach into healthcare services in locations and sites that charge lower rates than hospitals. With rising healthcare costs in recent years and the federal government’s reduced spending on health, insurers have been under increased pressure to expand.

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