Both home health care and Medicare Advantage (MA) are currently in rough rate environments. But Humana Inc. (NYSE: HUM) leaders believe in the company’s ability to continue growing MA membership with solid margins, partly by leaning into CenterWell Home Health and its other provider assets.
Earlier this month, the Centers for Medicare & Medicaid Services (CMS) finalized what MA plans considered to be an underwhelming – though unsurprising – payment rule for 2025.
“I [want to] further emphasize that we continue to believe there is strong bipartisan support for the MA program, and that the strong core fundamentals and growth outlook for MA and value-based care remain intact,” Humana CEO Bruce Broussard said on the company’s first-quarter earnings call Wednesday. “In addition, Humana’s platform, unique focus on MA and expanding CenterWell capabilities will allow us to compete effectively and deliver compelling shareholder value over the long term.”
The Louisville, Kentucky-based Humana has close to 6 million MA members underneath its belt, trailing only UnitedHealth Group, which has about 9 million, according to Kaiser Family Foundation. UnitedHealth Group also maintained its bullishness on MA during its earnings call last week.
Meanwhile, Humana’s CenterWell arm includes primary care, pharmacy and home health care. CenterWell Home Health is one of the largest providers of home health care in the country.
CenterWell Home Health is payer agnostic, but part of the Humana strategy is to put MA members under value-based models driven by its own provider assets.
“As we think about the CenterWell opportunity, there’s a literal incremental opportunity from just further penetrating our CenterWell capabilities by health plan members, which we continue to focus on,” Humana CFO Susan Diamond said on the call. “We do believe, over time, if we can create differentiated experiences for our members who use these services, that we can increase client satisfaction and increase engagement, which should ultimately lead to better star results, improved loyalty and retention, and overall improve total cost of care and health outcomes.”
Humana anticipates that it will grow its MA membership by about 150,000 in 2024, good for a 2.8% increase.
In the quarter, the company brought in $29.6 billion in total revenue, an over 10% year-over-year increase. CenterWell revenues totaled $4.8 billion, an about 7% year-over-year increase.
Other MA considerations
Even if Humana leaders have struck an optimistic tone, investors aren’t necessarily buying it. Year over year, Humana’s stock price is down over 40%.
The tumble it has taken on the public market has been relatively consistent over the last year and a half, and it has provoked the thought of renewed deal talks between Cigna Inc. (NYSE: CI) and Humana.
“The math now works for a CI+HUM fusion,” Jefferies Analyst David Windley wrote this week, suggesting that a deal for Humana at about $420 per share would be plausible. Humana’s stock price, as of midday Wednesday, was hovering around $314 per share.
Humana-Cigna combination talks picked up in late November, then stalled in mid-December.
It’s unclear whether Humana would be reengaging in talks at a low point, however. And, for now, its executives believe that the tide on MA will turn back around.
“The industry is experiencing a dynamic and challenging time we must navigate,” Broussard said. “And while the current environment will create disruption for the industry in the near term, I continue to believe in the strong fundamentals and growth outlook of the MA industry. Our ability to effectively compete in the MA market remains intact.”
Broussard specifically mentioned that he believed MA penetration would continue, and that about 60% of Medicare beneficiaries would be under MA plans over the next few years.
As of right now, just over 50% of beneficiaries are enrolled in MA.
“We feel the value proposition is going to continue to be strong as a result of not only the actuary value, but also the additional benefits,” Broussard said. “We continue to believe that that’s going to [lead to] more penetration of Medicare Advantage for Medicare beneficiaries overall.”
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