Humana reorganizing, paring down to two main units
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In a move meant to simplify its organizational structure, Humana will pare itself down into two main units, Insurance Services and CenterWell, while launching an executive search for president of insurance and enterprise services.
In a second-quarter earnings call posted Thursday, executives said separating the company into the two units will encourage collaboration, and accelerate the work being done to centralize and integrate operations.
The Insurance Services unit will comprise what is currently the retail, group and specialty segments, while Centerwell will encompass healthcare services. The executive search will focus on candidates with experience running complex organizations.
WHAT’S THE IMPACT
Humana CEO Bruce D. Broussard said during the investor call that the company has made “meaningful progress” in advancing its strategy over recent months. This, he said, has resulted in a significant expansion of its service businesses, which he expects wouldl further strengthen its Medicare Advantage and Medicaid platforms.
“The work completed on our value-creation initiative has led to an organizational simplification that enables us to accelerate (our) previously planned organizational streamline,” he said.
Broussard said he expects a simpler structure that will accelerate efforts to centralize the work being done within the organization.
Humana’s earnings have grown 20% over this period in 2021, he said.
THE LARGER TREND
The restructuring follows on the heels of other organizational changes. In April, Humana signed a definitive agreement with private investment firm Clayton, Dubilier & Rice to divest a majority interest in Humana’s Kindred at Home subsidiary, KAH Hospice.
Under the agreement, Humana will divest a 60% interest in KAH Hospice and receive cash proceeds of approximately $2.8 billion.
The division includes patient-centered services for hospice, palliative, community and personal care. Humana had previously indicated its intent to divest a majority stake in these non-core businesses when it acquired the remaining interest in Kindred at Home in April 2021.
The strategy has always been to partner, rather than own these lines of business, according to Humana. This is aligned with the company’s previously stated intent to divest the majority interest in the Hospice and Personal Care divisions, while maintaining a strategic minority interest.
In June, the company said it was adding 14 states to its ongoing initiative to rebrand the home health division of Kindred at Home as CenterWell Home Health. KAH home health services have already begun transitioning to the CenterWell brand in a number of other states, with Phase 2 bringing the total up to 21 states overall.
The transition is part of a larger effort to fully integrate Kindred at Home’s home health operations into Humana. The company introduced the CenterWell Home Health brand, along with the first phase of transitioning the home health division of Kindred at Home, on March 1.
In January, Humana drastically reduced its Medicare Advantage enrollment estimates for 2022 due to a large number of terminations during the last enrollment period. the former projection of 325,000 to 375,000 new MA members has been slashed to 150,000 to 200,000 new members. Humana also expects group MA membership to be generally flat throughout this year, as it doesn’t anticipate any large accounts will be gained or lost.
The news caused Humana shares to plunge at least 21% the day of the announcement.
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