Jim Rechtin took the helm as the president and CEO of Humana Inc. (NYSE: HUM) on the first of July. A month in, he’s already tasked with facing tough questions, like how the company plans to combat regulatory headwinds in Medicare Advantage (MA) and home health care.
Home health providers and MA plans have continually been at odds over payment for services. Humana is unique in the fact that it has one of the largest MA businesses in the country, as well as one of the largest home health providers under its umbrella.
And, at the same time, MA plans and home health providers are both aiming to prove their worth to the Centers for Medicare & Medicaid Services (CMS) in order to mitigate continued payment cuts to their respective programs.
“Let me start by just reinforcing what I think is basic truth about the business,” Rechtin said on the company’s second-quarter earnings call Wednesday. “It’s a good business, it’s good for our members and it’s good for our patients. This is well documented, in my opinion. CMS and the federal government, state government, and by extension even taxpayers are also our customers. I think we need to constantly remind ourselves of that. What we do creates value for those customers as well.”
The Louisville, Kentucky-based Humana has close to 9 million MA members, a number that puts it only behind UnitedHealth Group (NYSE: UNH). CenterWell – its provider services arm – includes home health care, primary care and pharmacy services.
“We need a regulatory environment that allows that value to be fully realized and that requires constant collaboration and adjustment,” Rechtin continued. “We need to be a proactive partner with CMS in that process, and we need to do this to make sure that we’ve got a long-term, stable Medicare, Medicaid program.”
Broadly, MA plans have undergone consecutive cuts to “core” rates from CMS. Whereas growth used to be of utmost importance in MA, payers like Humana are more often now “prioritizing profitability.”
On the earnings call, John Ransom, a managing director at Raymond James, suggested that MA plans were losing the battle in Washington, D.C. He specifically called out certain data that suggested MA costs taxpayers 13% more compared to traditional Medicare.
Rechtin, in response, insinuated that Humana does more on behalf of its members than traditional Medicare does. He indicated that it was the messaging that needed to change in Washington, D.C.
“We get better outcomes,” he said. “We deliver better health security by lowering the cost to members for the care that they receive and giving them access to more benefits. We also know, and it’s pretty well documented, that we deliver like for like benefits at a lower cost than what original Medicare does. Those two things mean that there’s a value proposition for members and for taxpayers. What we can do a better job of – and part of what I think the entire industry needs to be focused on – building the case for the second of those two things even more tightly and then better explaining and understanding what of that value does accrue back today to taxpayers.”
In the quarter, Humana brought in $29.54 billion in total revenue, an over 10% year-over-year increase. CenterWell revenues totaled $4.8 billion, an over 9% year-over-year increase.
Humana also expects a 4.2% increase in MA individual membership growth in 2024, or representing approximately 225,000 members.
Growth in the home
Later on, Rechtin expressed confidence in the CenterWell business overall, including the home health segment.
He also said the home health team is preparing for “continued rate pressure” in the space, however.
“The home business has generated high single-digit admission growth,” Rechtin said. “The team continues to improve their cost structure, anticipating continued rate pressure in that space.”
The home business also was one of the primary factors in “favorable” year-over-year growth for CenterWell, according to Humana.
“The favorable year-over-year quarter and YTD CenterWell segment revenues comparisons were primarily impacted by the following factors,” Humana wrote in its earnings press release. “Greater intersegment revenues associated with the Home Solutions business in 2Q24 and YTD 2024 as compared to respective periods in 2023 as a result of the expansion of the value-based home care model, and higher revenues associated with growth in the company’s Primary Care business, partially offset by the impact of the v28 risk model revision.”
Humana also recently announced a partnership with Walmart (NYSE: WMT), which will allow it to open CenterWell Primary Care locations within 23 Walmart Supercenter retail stores in Florida, Georgia, Missouri and Texas.
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