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Our Take: Humana’s second JV with WCAS will invest up to $1.2 billion to open more value-based primary care clinics

May 23, 2022

Editor’s Note: Due to the upcoming Memorial Day Holiday, Our Take will return on June 6.

Humana is ramping up its partnership with New York-based investment firm Welsh, Carlson, Anderson & Stowe (WCAS) by establishing a second joint venture (JV) that will develop and operate approximately 100 new payer-agnostic primary care clinics for seniors — at a cost of up to $1.2 billion.

When the two formed their first JV in early 2020, they agreed to invest approximately $600 million to open primary care centers with a focus on Medicare beneficiaries. WCAS was to have majority ownership in the centers, and a Humana subsidiary called Partners in Primary Care would run them and collect a management fee.

At the time, Partners in Primary Care already ran 47 similar centers in six states. Humana said the JV with WCAS would likely more than double that number of centers over the following three years.

In early 2021, as Humana began rebranding its payer-agnostic health care services under the CenterWell umbrella, Partners in Primary Care and another subsidiary, Family Physicians Group, took the name CenterWell Senior Primary Care.

In last Monday’s press release, Humana and WCAS revised the numbers for their original JV, saying they would invest up to $800 million to open 67 clinics by early 2023. The estimated 100 additional clinics in their second JV are to be developed from the start of 2023 through the end of 2025.

As with the first JV, WCAS will hold a majority ownership stake. CenterWell Senior Primary Care will receive a management fee, which includes performance-based incentives, for running the clinics.

Humana has the option of acquiring WCAS’ stake in the JV down the road, and WCAS has the option of requiring Humana to purchase the investment firm’s interest in the JV in years to come.

Our Take: Humana says CenterWell Senior Primary Care is the country’s largest provider of senior-focused primary care. We’re not sure what criteria the insurer is using to make that statement, but in any case, Humana is serious about cementing its position as a leading provider of primary care for the over-65 crowd, especially those with a Medicare Advantage (MA) health plan.

As of March 31, according to Humana, the insurer’s primary care organization was operating 214 senior-focused primary care clinics. That figure includes 37 clinics established through the original JV with WCAS and 177 other, wholly owned centers.

(We’re assuming this takes into account the 47 clinics that Primary Partners in Care was running in early 2020, before the first JV was announced, as well as at least 22 clinics that Family Physicians Group had in central Florida when Humana bought the organization in April 2018 and 104 senior-focused primary care centers that another Humana subsidiary, Conviva, was operating when the initial JV came to be. Of note, Conviva — now known as Conviva Care Solutions — and its clinics are not part of the Humana-WCAS JVs.)

Collectively, the 214 clinics serve approximately 180,000 patients in Medicare value-based arrangements and support 58,000 patients through independent practice association arrangements.

Humana said it anticipates adding another three dozen or so clinics by the end of the year. Presumably, some of those could be Conviva-operated centers. Through the JVs with WCAS, Humana plans to add 30 to 50 “de novo” CenterWell clinics each year through 2025.

For now, CenterWell has a presence in just nine states, and that’s counting both Kansas and Missouri as part of the Kansas City Metropolitan area.

If Humana wants to retain its title as the leading provider of senior-focused primary care, then it will need to expand its footprint. Other contenders, such as VillageMD and Oak Street Health, will be looking to increase their slice of the profitable MA pie.

Then again, Humana has a leg up on these other competitors with its CenterWell Home Health services, and that advantage could prove to be increasingly important as more older adults seek to stay in their home well into their later years.

As of last month, Village MD’s Village Medical at Home had 25 partnerships with home health providers in seven markets, but VillageMD’s goal, according to Home Health Care News, is to substantially expand this year, with an eye to having 63 provider partners in 23 markets by the end of 2022.

That pales in comparison to the Kindred at Home network, which Humana now owns in its entirety and has rebranded under the CenterWell moniker. In March, when Humana officially launched CenterWell Home Health, the insurer said when the rebranding was completed that CenterWell Home Health would “support patients from more than 350 locations across 38 states.”

The MA pie is plenty large enough for many to enjoy a large slice. Kaiser Family Foundation reported last June that 42% of the total Medicare population was enrolled in an MA plan, and that share was expected to increase to approximately 51% by 2030.

Humana is playing it smart, partnering with WCAS to expand CenterWell Senior Primary Care without having to put up a huge amount of its own cash. We suspect that WCAS isn’t too worried about the return on its investment.

Addressing America’s Nursing Crisis with Nurse Alice

This week on Health Care Rounds, John speaks with Alice Benjamin, famously known as Nurse Alice. John and Alice discuss the factors driving the nurse shortage in America and how the pandemic has exacerbated the problem. Alice elaborates on what we need to do to address this now, sharing her passion for tackling some of the fundamental obstacles we face in health care in order to provide better patient outcomes. Alice is Nurse.org’s Chief Nursing Officer and is a regular contributor to NBC Los Angeles. She also hosts the popular ‘Ask Nurse Alice’ podcast. Listen here or wherever you get your podcasts.

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