Coming off an unfavorable final rule for Medicare Advantage (MA) plans, Humana Inc. (NYSE: HUM) is still riding high.
The company’s leaders explained the strategy behind recent success in MA, and future success in home health care, on an earnings call Wednesday.
During the call, Humana CEO Bruce Broussard applauded the Centers for Medicare & Medicaid Services (CMS) for adopting a three year phase-in in the risk model changes for the 2024 MA rate notice.
“It serves to mitigate the impact of unintended consequences to beneficiaries resulting from these changes,” he said.
Looking ahead, Humana has a rosier MA outlook, believing it will remain a “compelling” value proposition for seniors.
“We believe the industry will continue to see strong growth,” Broussard said. “Medicare Advantage products have seen a steady rise in their consumer value proposition offering key benefits that are not covered by fee-for-service Medicare, including benefits focused on closing barriers to care, such as rides to the doctor, and deep focus on coordinating care for those with chronic illnesses.”
Another one of those benefits not offered under traditional Medicare is personal home care.
Humana has its insurance side – which includes TRICARE, MA and Medicaid – and the CenterWell side, which includes home health care, pharmacy and primary care services.
The company’s current individual MA membership growth estimate is at least 775,000 for the full year, good for 17% growth year over year.
Additionally, Humana is seeing strong MA growth in states with robust or increasing value-based provider penetration.
“We have grown membership nearly 13%, year to date, in Texas, Georgia, Florida and Illinois, which are highly penetrated value-based markets,” Broussard said. “Importantly, the growth we’re experiencing in 2023 continues to be high quality with better-than-expected retention.”
Humana has also been able to gain a competitive edge against its MA plan peers, according to Broussard.
“We continue to see a higher percent of our new sales reflecting members switching from competitors than originally anticipated,” he said. “We previously shared that 50% of our new sales in [annual election period] reflected members switching from competitor plans. We’ve been pleased to see this trend continue in [open enrollment period]. We are proud of the impressive membership growth achieved in 2023.”
Broussard noted that the company is well positioned to grow at, or above, high single digits in the future.
CenterWell’s growth
CenterWell continues to drive considerable growth for Humana as well.
Currently, Humana operates a total of 249 primary care centers under the CenterWell Senior Primary Care and Conviva Care Center brands, serving 266,000 patients, including 207,000 across its wholly owned and de novo portfolios. This is a 16% growth in centers and an 11% growth in patients served year-over-year.
New start-of-care admissions were up 7.1% year over year in Q1.
Regarding Humana’s value-based home health model, the expansion rollout is moving along as planned. It now covers more than 815,000 MA members under its full value-based model, which includes care coordination, home health, DME and infusion, according to Broussard.
The company expects to cover 1.8 million members under this model by the end of 2023, with further expansion to 40% of its MA membership by 2025.
On the M&A front, Humana has resumed tuck-in home health deal activity in Q1. The company completed its acquisition of Trilogy Home Health, a portfolio company of Kinderhook Industries, which added 11 branches, with an average daily census of 4,700 and 25,000 admissions per year.
“We are committed to continuing to grow our agnostic CenterWell Home Health business and expand market share through organic growth and strategic M&A activity,” Humana CFO Susan Diamond said on the call.
Overall, Humana reported revenues of $26.7 billion in the first quarter, a 12.3% increase, compared to $23.9 billion in Q1 2022. CenterWell brought in $4.5 million, compared to $4.3 million during the same period last year.
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