Insight, analysis & opinion from Joe Paduda

< Back to Home

Nov
29

The Humana – Concentra deal: this isn’t that hard to figure out, people

We’ve all had a few days to digest the recently announced Humana – Concentra deal, and perhaps think thru what this means for Humana, why they did the deal, and if this gives any insight into what other health plans may do.
Perhaps the best one-sentence synopsis of the deal was provided by a Humana spokesperson: “This acquisition is consistent with the goals of health reform”.
Here’s the slightly longer version.
1. Three million Humana members are located in close proximity to Concentra facilities.
2. Concentra knows how to deliver primary care efficiently. They are also working hard at wellness and health promotion.
3. Health plans are going to be desperate for primary care providers come 1/1/2014, when their membership will explode.
4. Health plans that can keep patients away from specialists, expensive diagnostics, and facilities are going to do very, very well. That can only be accomplished with good primary care.
5. Concentra has very strong relationships with local employers, and solid experience selling to those employers.
I was a little surprised to read some of the financial community’s statements about the deal.
For example, AM Best said “This transaction is expected to be a source of business diversification for Humana as well as unregulated cash flows.”
This was the lead sentence in their comment on the deal, and while it mentions a couple benefits, I doubt they were the primary reasons Humana decided to shell out almost $800 million. Sure, the cash flow is unregulated, and business is different, but workers comp also faces a structural issue with declining claims frequency and is highly vulnerable to regulatory risk, two factors that would militate against a ‘diversification and cash flow’ rationale.
Then there was this gem from Marketwatch: “Plus, the company said it was buying privately held insurer [emphasis added] Concentra Inc. in Addison, Texas, for $790 million in cash.”
There has also been some speculation that the deal was – at least partially – due to a desire on the part of Humana to buy a provider and thus get around, avoid, or mitigate Florida MLR rules. While this may have been a contributing factor, it is highly unlikely it was one of the top reasons Humana did the deal. Humana already has primary care centers in Florida as a result of the CarePlus deal in 2005 and Concentra doesn’t have a lot of facilities in the Sunshine State.

Perhaps Humana is going to add occ med services to the ten or so CarePlus facilities;
this would help it’s soon-to-be subsidiary and give analysts evidence of that oft-cited ‘synergy’ thing.
The net is this. Reform is coming, healthplans must drastically change their operating models, and winners will be the ones that figure out how to market to and manage previously-uninsured, and solve primary care.
Humana’s got a good start.


Joe Paduda is the principal of Health Strategy Associates

SUBSCRIBE BY EMAIL

SEARCH THIS SITE

A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

DISCLAIMER

© Joe Paduda 2024. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.

ARCHIVES

Archives