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Humana will buy stake in Kindred’s home care business


A U.S. federal judge determined head-to-head competition between Aetna and Humana that would be eliminated if the deal were finalized.

LOUISVILLE — Humana announced Tuesday it will acquire a 40% minority stake in Kindred Healthcare’s home care business for about $800 million in a joint venture with two private equity firms.

The two firms — TPG Capital and Welsh, Carson, Anderson Stowe  — along with Humana are jointly creating a consortium to purchase all of the outstanding securities of Louisville-based Kindred Healthcare for $9 per share in cash, or $4.1 billion.

The goal is for Humana, the Louisville-based health insurance company, to acquire full ownership of Kindred’s home care business in three to five years at a price to be determined later.

“The acquisition of a minority interest in Kindred at Home, the largest home health company in the country with significant overlap with Humana membership, brings to us an experienced, well-respected home health provider with robust access to extensive clinical capabilities that will allow us to accelerate our strategy to more deeply integrate with our members’ lifestyles,” Bruce Broussard, Humana’s president and chief executive, said in a statement released Tuesday morning.

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“We are excited about the opportunity this acquisition provides to advance our vision for integrated care delivery. … We believe that care in the home is a vital element of improving the health of seniors living with chronic conditions,” he said.

The transaction will provide Humana (HUM) with extensive geographic coverage, with roughly 65% overlap with its individual Medicare Advantage members. It also will provide more data and analytics to improve care for seniors, the company said.

“The combination of Humana At Home’s pursuit of improving care for seniors living with chronic conditions, in concert with Kindred At Home’s care delivery, will allow these important capabilities to create more effective care in a compassionate way for our members,” said William Fleming, Humana’s healthcare services president.

He said the deal holds the potential to cut medical costs and improve wellness. “We believe this work will lead to reduced hospitalizations, reduced emergency room visits, and allow physicians and clinicians to extend their care all the way to the patient’s home,” Fleming said in the release.

David Causby, now executive vice president and president of Kindred at Home, will serve as CEO of Kindred at Home. 

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The transactions are expected to close this summer if state and federal regulators sign off. Humana expects to pay company cash for the purchase and executives don’t expect it to impact earnings in 2017 or change the outlook for 2018. The acquisition could reduce earnings for 2019 and beyond, the statement said.

The deal doesn’t surprise health care analysts who have followed Kindred (KND) closely. The company has been strapped with debt and by most accounts, tied too closely to declining reimbursements paid under the federal Medicare program. 

When the company sold nearly 90 skilled nursing centers last summer, analysts speculated that the $910 million transaction had opened questions about whether breaking up and selling other parts of Kindred’s sprawling business, which includes rehab centers, hospitals and other in-home services, was on the horizon.

Humana, meanwhile, was seen as a potential buyer for the in-home division after executives repeatedly said that their focus is on improving care for chronically ill older Americans. 

Earlier this year, Aetna — which is now being purchased by CVS — and Humana scrapped a potential merger after a federal judge ruled it would likely lessen competition.

Contributing: Edward C. Baig, USA TODAY. Follow Grace Schneider on Twitter: @gesinfk

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