Humana Set to Pay $550M to Buy Clinics From Private Equity Partner

Humana Inc., the popular American health insurance firm headquartered in Louisville, Kentucky, looks set to pay between $450 and $550 million to purchase a group of primary care centers focused on senior citizens.

This acquisition will be a part of Humana’s partnership with the New York-based private equity company Welsh, Carson, Anderson & Stowe (WCAS). With this move, Humana aims to advance its focus on primary care through the expansion of its chain of clinics into more markets. 

The company initially penned a deal with WCAS in early 2020 to inaugurate senior-focused primary care clinics. The aim of the partnership was to open at least 67 clinics by early 2023. To achieve this, it wanted to invest at least $800 million. Both parties included various put and call options as part of the deal, allowing Humana to either buy WCAS’ stake in the venture or let WCAS force the firm to do so over the course of the next five to 10 years.

Susan Diamond, Humana’s CFO, noted during last week’s investor meeting that the firm plans to operate around 250 primary care clinics before 2022 ends. According to her, the long-term cash outlay from 2026 to 2030 will be between $2.5 and $3.5 billion. The company plans to fund the transactions using a mix of debt and cash on hand, hoping to grow its earnings along the way. The primary aim of the firm in terms of capital use would be to drive organic, sustainable growth. However, it will still look to find strategic M&A opportunities, Diamond continued.

As things stand, CenterWell will control the new clinics established through the venture. Meanwhile, WCAS will maintain majority ownership of the joint venture for the remainder of the agreement, at least until Humana decides to buy the company’s interest, which it could do so beginning in 2028.

Humana is focusing its efforts on integrating the CenterWell brands and becoming a better healthcare provider, according to Susan Benoit, CenterWell Home Health president. “I’m excited about [CenterWell Home Health] because it just emphasizes keeping patients at the center of everything that we do,” she stated last week during Home Health Care News’ FUTURE event. “We’re working on really trying to integrate and see how this interrelates to patient care and taking the best care of patients that we possibly can by working together through [our] different brands.” To create a better environment for coordination and communication, Benoit said it’s imperative for companies to work across different brands and platforms.

As of now, CenterWell Senior Primary Care is the biggest senior-oriented healthcare provider in the country. It intends to broaden its horizons both domestically and internationally soon. It currently operates as many as 214 clinics across the CenterWell and Conviva Care Solutions banners, including 177 wholly-owned centers and 37 clinics through the JV with WCAS. By the end of this year, Humana expects to add at least 33 more clinics to the list, taking the number to 250.