The proposed home health rule would have a $30 million impact on Humana’s healthcare business, Susan Diamond, chief financial officer for Humana, said in the firm’s second-quarter earnings call last week.
“It’s slightly higher for the Kindred business specifically,” she said, according to the earnings call transcript, referring to the company’s home health division of Kindred at Home, now rebranded as CenterWell. “But within our Medicare business, we did not contemplate that level of rate reduction in our thinking for the health plan for ‘23. And so there is some mitigation within the year relative to that. So that net impact at the proposed rate is about $30 million.”
She noted that the proposed rule will further propel the company to pursue value-based care models. In June, Humana disclosed it launched its onehome value-based care model in Virginia.
The company remains “committed to expanding that model to about 50% of our MA members within the next five years,” she said in the earnings call last week. “So we are, I think, ahead of that curve, but we are encouraged by some of the discussions we are having with some other home health providers who I think are becoming more focused on value-based payment models, which we do think is important and will provide an opportunity to get after some of the adverse implications in terms of hospitalizations and avoidable admissions that we think home health has an opportunity to impact if they become more focused on it.”
The proposed home health rule, which would reduce home health Medicare payments by 4.2%, or $810 million, has mobilized the home health industry. Two bills were introduced in the Senate and House last week freezing Medicare payment rates until 2026. Dombi noted at the National Association for Home Care & Hospice’s Financial Management Conference last week that the bills kick off an intensive grassroots campaign to block the proposed rule from taking effect.
‘Two distinct units’
Also in last week’s call, CEO Bruce Broussard disclosed that beginning next year, the company will realign itself into “two distinct units,” CenterWell and Insurance Services. CenterWell will represent the current healthcare services segment. Insurance Services will be composed of the businesses that sit in the retail and group and specialty segments, he said.
“We believe this simpler structure will create greater collaboration across our Insurance and CenterWell business and will accelerate work that is underway to centralize and integrate operations within the organization,” he said, according to the earnings call transcript. “The realignment also expands the scope of authority for leaders and allows us to operate with greater agility and focus in increasing capture synergies across our portfolio.”
Hospice divestiture
Executives on the call also addressed the Kindred hospice divestiture, saying it is on track to close in the third quarter. Because of the divestiture, the company has updated its full-year guidance, resulting in a reduction in the Healthcare Services segment “revenue of approximately $400 million at the midpoint, which reflects the hospice divestiture, partially offset by the increased pharmacy expectations discussed in the first quarter.”
Humana also lowered its full-year consolidated adjusted cooperating cost ratio guidance “as the hospice business carries a higher operating cost ratio than the company’s consolidated operating cost ratio.”
