Humana plans to expand its primary care network for seniors this year, as the insurer looks to lean on provider capabilities to boost its beleaguered Medicare Advantage business.
In 2024, CenterWell Senior Primary Care plans to enter three new markets in North Carolina and Louisiana, and add additional centers in eight of its current markets in the U.S., the payer announced on Tuesday.
Humana is one of many health insurers racing to build out a provider network to provide convenient access to primary care for its members. But for Humana, this strategy is more important than it might be for its rivals with a broader variety of plans, given Humana has made such a significant bet on Medicare Advantage, said Arielle Trzcinski, a healthcare analyst at market research firm Forrester.
As MA’s earnings potential shrinks amid higher medical costs and unfavorable regulatory changes, payers are making significant changes to preserve profits. “That’s true not only of Humana, but other plans as well,” Trzcinski said. But for Humana, “CenterWell is the mechanism they can deploy.”
The CenterWell strategy
Humana restructured into two businesses in 2022: its insurance benefits segment and health services arm CenterWell. Along with offering specialty and retail pharmacy, CenterWell says it is the largest provider of senior-focused primary care and home healthcare in the U.S.
Together, CenterWell Senior Primary Care and its sister brand Conviva Care Center deliver care to roughly 295,000 seniors in nearly 300 centers spanning 15 states. In comparison, the company operated 200 centers in nine states at the start of 2022.
Humana has a joint agreement with frequent PE collaborator Welsh, Carson, Anderson & Stowe to co-fund new primary care centers under the CenterWell brand.
A spokesperson for the payer declined to share how much CenterWell investing in its 2024 expansion. However, Humana’s joint venture with WCAS in 2022 allocates up to $1.2 billion to develop clinics between 2023 and 2025.
CenterWell could be the key to Humana’s strategy to restore its long-term margins. The payer’s earnings outlook has taken a major hit from the impact of seniors in its Medicare Advantage plans utilizing more medical care than expected.
As a result, Humana plans to raise premiums and cut benefits in MA to boost its margins come 2025. The insurer could also exit markets, but won’t leave any where it has a CenterWell presence, executives told investors during its fourth-quarter earnings call.
“The growth and the scalability and the integration of CenterWell offers us that opportunity to continue to expand not only our services that we find are much more effective in clinical outcomes and satisfaction, but also the ability to continue to drive better and better value for the enterprise overall,” CEO Bruce Broussard said.
By increasing members’ access to primary care providers and heading off worse health outcomes (and higher medical costs) down the line, Humana can keep a greater share of premiums as profit. If those primary care providers are owned by Humana, the payer can pay itself for providing medical care too, a financial salve as Humana faces its less-than-rosy earnings outlook.
Humana’s intercompany eliminations — essentially, how much revenue Humana pays subsidiaries like CenterWell for providing services to itself — reached $3.9 billion in the fourth quarter, up 17% year over year.
And, despite steep losses in Humana’s insurance segment in the fourth quarter due to the skyrocketing medical costs, Centerwell’s operational profit grew 47% year over year, thanks in part to growth in its primary care business.
This year, CenterWell will launch clinics in its new regions of Baton Rouge and New Orleans in Louisiana, and Asheville, North Carolina. The clinics are tentatively scheduled to begin seeing patients in the late spring and early summer, Humana said.
CenterWell is also opening new clinics in the existing markets of Charlotte and Raleigh, North Carolina; Indianapolis, Indiana; Jackson, Mississippi; Louisville, Kentucky; Orlando, Florida; and Richmond and Tidewater, Virginia.
The payer doesn’t have a specific timeline for those openings, but said they should be completed by the end of this year.
Along with building new clinics de novo, CenterWell Senior Primary Care has also been expanding through acquisitions. In September, the business announced it was purchasing 30 centers in Texas and Nevada from primary care network Cano Health for $67 million.
CenterWell has also focused on expanding its in-home care offerings, a key growth area for MA insurers. Last summer, Humana launched CenterWell Primary Care Anywhere, a primary care at home program for Medicare seniors in select Georgia and Louisiana locations on Wednesday.
Humana plans to expand Primary Care Anywhere to 10 other southern and southwestern states in the future.