Humana and private equity firms TPG Capital (TPG) and Welsh, Carson, Anderson & Stowe (WCAS) announced on Monday that they have completed the acquisition of Kindred Healthcare, a home health, hospice and community care business.
The agreement separates Kindred into two companies, with Humana picking up a 40% share in Kindred at Home. The payer will have the right to buy the remaining interest over time.
Analysts say Humana’s move into the hospice care space will help the Medicare Advantage payer with costs associated with end-of-life care.
The companies initially announced the $4.1 billion acquisition at the end of last year. The deal separates long-term acute care hospitals, inpatient rehabilitation facilities and contract rehabilitation services businesses from Kindred’s home health, hospice and community care businesses, which will be called Kindred at Home. TPG and WCAS will operate the former as a separate specialty hospital company.
Humana’s partial purchase of Kindred at Home fits in with the payer’s expanding Medicare Advantage (MA) footprint. Humana has the second largest membership in MA with more than three million members, a number only eclipsed by UnitedHealthcare.
Payers involved in MA are interested in hospice care companies since healthcare costs are highest at the end of life. A 2017 Health Affairs report estimated a mean per capita of $80,000 in the last 12 months of life alone.
The deal is yet another example of vertical integration in healthcare as healthcare companies look beyond their silos to acquire other businesses, forming alliances and partnerships that can fill gaps in the care continuum. Coordinating care and improving value will play an even bigger role in reimbursements in the coming years as CMS and private payers continue to transition to a value-based system. In a value-based environment, providers and payers will need to prove they’re offering quality and reducing costs.
Another payer, Anthem, recently agreed to acquire Aspire Health, a non-hospice, palliative care provider. Aspire offers in-home care support for patients with serious illnesses with an emphasis on care coordination through a care team that includes physicians, nurse practitioners, nurses and social workers.
Similar to Humana’s move into hospice care, Anthem could realize reduced costs and higher reimbursements if the payer can reduce hospitalizations among its chronically ill members.
Meanwhile, hospitals are increasingly using palliative care teams to reduce avoidable costs and provide end-of-life care. A recent Health Affairs report said hospitals with more than 50 beds offering palliative programs tripled between 2000 and 2015 from 25% to 75%. In 2015, more than 90% of hospitals with 300 beds and 100% of the National Cancer Institute’s Comprehensive Cancer Centers had palliative care services.