Both home health care and Medicare Advantage (MA) are currently experiencing a difficult rate environment. But Humana Inc. (NYSE: HUM) executives believe in the company’s ability to continue growing MA membership with solid margins, including by supporting CenterWell Home Health and its other providers.
Earlier this month, the Centers for Medicare & Medicaid Services (CMS) finalized a 2025 payment rule that MA considers a disappointing – although not surprising – payment rule.
“I [want to] “Furthermore, emphasize that we continue to believe that there is strong bipartisan support for the MA program and that the strong core fundamentals and growth prospects for MA and value-based care remain intact,” Humana CEO Bruce Broussard said on the earnings call of the company for the first quarter Wednesday. “In addition, Humana’s platform, unique focus on MA and expanding CenterWell capabilities will enable us to compete effectively and deliver compelling shareholder value over the long term.”
Louisville, Kentucky-based Humana has nearly 6 million MA members, trailing only UnitedHealth Group, which has about 9 million, according to the Kaiser Family Foundation. UnitedHealth Group also remained bullish on MA during its earnings release last week.
Humana’s CenterWell division now includes primary care, pharmacy and home health. CenterWell Home Health is one of the largest home health care providers in the country.
CenterWell Home Health is payer independent, but part of Humana’s strategy is to offer MA members value-based models based on their provider assets.
“As we think about the CenterWell opportunity, there is literally an additional opportunity to further penetrate our CenterWell capabilities through health plan members, which we continue to focus on,” Humana CFO Susan Diamond said on the call . “We believe that over time, if we can provide differentiated experiences to our members who use these services, we can increase customer satisfaction and engagement, ultimately leading to better star scores, improved loyalty and retention, and an overall Improvement in overall outcomes should result in care costs and health outcomes.”
Humana expects MA membership to grow by approximately 150,000 in 2024, an increase of 2.8%.
During the quarter, the company reported total revenue of $29.6 billion, an increase of over 10% year-over-year. CenterWell’s revenue totaled $4.8 billion, up about 7% year-over-year.
Further MA considerations
Even though Humana executives have struck an optimistic tone, investors won’t necessarily buy it. Year-over-year, Humana’s share price has fallen over 40%.
The public market slide has been relatively consistent over the past year and a half, sparking thoughts of renewed contract negotiations between Cigna Inc. (NYSE: CI) and Humana.
“The math is now working out for a CI+HUM merger,” Jefferies analyst David Windley wrote this week, suggesting a deal for Humana at around $420 per share would be plausible. Humana’s stock price was around $314 per share as of midday Wednesday.
Negotiations over the combination of Humana and Cigna began in late November and then came to a standstill in mid-December.
However, it is unclear whether Humana would resume talks at a low point. And for now, executives believe the tide will turn again at MA.
“The industry is experiencing a dynamic and challenging time that we must overcome,” said Broussard. “And while the current environment will cause short-term disruption to the industry, I continue to believe in the MA industry’s strong fundamentals and growth prospects. Our ability to compete effectively in the MA market remains intact.”
Broussard specifically mentioned that he believes the penetration of MA plans will continue and that approximately 60% of Medicare beneficiaries will have MA plans in the next few years.
Currently, just over 50% of beneficiaries are enrolled in the MA.
“We believe the value proposition will continue to be strong not only because of the actuarial value but also because of the additional benefits,” Broussard said. “We continue to believe that this will be the case [lead to] greater penetration of Medicare Advantage for Medicare beneficiaries overall.”