Humana Joins Equity Firms in $4.1B Purchase of Kindred Healthcare

The drumbeat of consolidation continues to pound steadily in US healthcare: Today, Humana is joining equity firms TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS) in a $4.1 billion purchase of Kindred Healthcare.

The transaction will spin Kindred into 2 separate companies. A new brand called Kindred at Home will include the company’s home health, hospice, and community care businesses, while its long-term acute care hospitals and rehabilitation services will remain under the name Kindred Healthcare. Humana will hold a 40% stake in the new “at Home” business with an option to buy the remaining 60% from TPG and WCAS at a later date. Kindred operates hundreds of home health programs around the country, with strong concentrations in the Southeast and Texas.

“The flexibility and resources gained through the investments by Humana, TPG and WCAS are expected to enhance innovation in both platforms, further our culture of a patient-first approach to high-quality, compassionate care and create new opportunities for Kindred employees,” Kindred CEO Benjamin A. Breier said in a statement, calling the deal “a significant step forward in transforming home healthcare in America.”

The deal will give Humana expanded resources for its sizeable Medicare Advantage population and continue its efforts to provide direct, value-based care to enrolled members. Having a large network of home health services under its roof will allow the insurer greater outcome control for patients with chronic conditions or recent hospital discharges.

“The insights we've gained from owning home health agencies demonstrates the value of having a home health platform to evolve capabilities and services, including integration of data, advancing moments of influence and transforming home health to value-based reimbursement,” Humana CEO Bruce Broussard said in an earnings call last month. Fee-for-service reimbursement models for home care do not “encourage the holistic management of health,” he added.

Kindred shareholders will receive $9 per stock, a 27% markup on the company’s 90-day volume-weighted average price. The company had discussed downsizing in recent years. In September, it exited the skilled nursing facility market, selling its locations in several states to BlueMountain Capital Management, LLC for $700 million.

The deal follows a string of high-profile purchases and mergers involving health insurance companies and healthcare service providers. UnitedHealth Group’s Optum subsidiary recently bought national dialysis center chain DaVita for $4.9 billion: the company controls over a third of the dialysis market. That move came days after news of CVS Health’s proposed $69 billion purchase of insurance giant Aetna broke. At the time, experts floated speculation that Walmart, itself a major retail pharmacy, would look to purchase Humana.