Humana (HUM) expands joint venture and invests $1.2 billion in Eyes 100 New Clinics – May 18, 2022
Humana inc. (HUM – Free Report) recently announced a second joint venture (JV) with private equity firm Welsh, Carson, Anderson & Stowe to expand its footprint in value-driven, senior-focused primary care settings . The joint venture will focus on Medicare patients and invest up to $1.2 billion.
During the forecast period 2023-2025, the joint venture is expected to develop approximately 100 new value-based primary care facilities. Humana’s CenterWell Senior Primary Care brand will operate the new clinics and collect management fees while HUM will hold a minority stake in the joint venture. He will have the option of buying out his partner’s stake in the JV in the future.
Under the first joint venture, HUM and its partner are investing $800 million to develop 67 properties by early 2023. The second joint venture will allow the partners to scale up their operations and increase their footprint in the world. high-demand primary care space. At the end of the first quarter, Humana’s Primary Care Organization operated 214 senior-focused primary care clinics, incorporating 37 facilities from the first joint venture. These facilities serve approximately 180,000 Medicare patients.
Humana intends to serve Medicare patients at approximately 250 clinics by the end of 2022 and to add 30 to 50 facilities per year over the next three years. The new JV formation comes at a time of increasing competition in the market. Small players and start-ups are getting more and more Medicare Advantage members, which reduces opportunities for membership growth for large companies like Humana, Cigna Corporation (THIS – Free report), et al.
Earlier this year, HUM cut its forecast for Medicare membership growth by about 50%. The health insurer plans to add 150,000 to 200,000 net members under Medicare Advantage plans in 2022, down from the previous estimate of 325,000 to 375,000.
Humana is focused on joint ventures, de novo expansions and inorganic growth to bolster its already sizeable platform. The new joint venture will allow HUM to expand its primary care clinics to more markets while sharing the associated risks. Cigna also strives to stay above the competition. Through multiple strategic initiatives, CI forecasts total medical customer growth of at least 7.25,000 for 2022, up from the previous vision of “at least 5.75,000.”
Shares of Humana are up 4.5% in the past three months compared to the 5% rise of the industry to which it belongs.
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Zacks ranking and key picks
Humana currently has a Zacks rank of #3 (Hold). Some top ranked players in the medical – HMO space are Select Medical Holdings Corporation (SEM – free report) and UnitedHealth Group Incorporated (A H – Free Report), both currently carrying a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rising revenues and a series of acquisitions made over the years will likely drive Select Medical’s long-term growth. The increasing incidence of diseases increases the number of patient admissions for SEM. It has beaten on earnings in each of the past four quarters, averaging 42%.
UnitedHealth’s healthcare services business, under the Optum brand, is becoming increasingly valuable. It is also essential to its diversification strategy. Several acquisitions made in this segment, the use of advanced technologies, market-leading health analytics, modern care delivery and data-driven population health approaches give Optum a long streak of growth. . UNH has beaten earnings in each of the past four quarters, averaging 3.7%.