Clayton, Dubilier & Rice have acquired a majority stake in the hospice division of Humana (NYSE: HUM) in a $ 3.4 billion transaction.
Important reason: The deal takes place just weeks after Optum bet $ 5.4 billion on the LHC Group, making home care as an end market and its providers important not only for patients but also for promoting value-based care. Further prove that it plays a key role. Desirable setting.
What they are saying: CD & R’s Ravi Sachdev tells Axios that the partnership provides an opportunity to think creatively about how to leverage both Humana’s vast network of managed lives and CD & R’s primary care portfolio (agilonhealth and Millennium Physician Group). increase.
- “We are innovating across the ecosystem and trying to connect hospice more to primary care. Home healthcare providers, hospice providers, nephrologists, oncologists—they are playing an important role in accelerating. I’m precious. ”
- CD & R operating partner Dr. Anand Shah adds that value-based care tends to be isolated.
detail: Humana will sell a 60% stake in the country’s largest hospice platform (holding 40%) and earn approximately $ 2.8 billion in cash revenue.
- The $ 3.4 billion corporate value is 12 times the 2022 sector forecast-adjusted EBITDA. This means that the estimated annual EBITDA is about $ 283 million.
Be wise: Hospice benefits are currently only covered by FFS Medicare, but the CMS is also officially testing the Medicare Advantage pilot program, known as the Value-Based Insurance Design (VBID) model.
- Through the VBID model, the agency is actively collecting data and monitoring opportunities today to improve care in Massachusetts. It could point in the direction of institutions that ultimately expand the interests of hospice for the beneficiaries of MA.
- The United States has undoubtedly reached a turning point in the adoption of MA and is now approaching 50% of eligible older people.
Catch up quickly: Axios wrote in January that the health insurance giant began a sale process focused on the unit’s private equity through Goldman Sachs last year after discussions with the strategy were not reached.
- Humana purchased 60% of Kindred at Home, which it does not yet own, in 2021. This includes Kindred’s home care, hospice and community care businesses.
- The deal gave Kindred at Home a $ 8.1 billion valuation and provided an exit for former JV partners TPG and Welsh, Carson, Anderson & Stowe.
- Humana at the time announced its intention to eventually sell the hospice and community care business.
What’s next: Upon completion, CD & R and Humana will have the opportunity to expand their platform offerings centered on clinical programs to improve patient hospice care.
- In a broader sense, we expect more M & A and existing participation in home care, including both major insurance companies and retail pharmacies.
- As the home care industry matures, the ability to manage patients at home using technology will improve. [home care] Providers will continue to rise, which will facilitate continued integration, “says Sachdev.
