Humana Inc. (HUM) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to the Humana First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. With that, I would now like to hand the conference over to your speaker today, Amy Smith, Vice President of Investor Relations. Thank you, and please go ahead. Amy Smith: Thank you, and good morning. In a moment, Bruce Broussard, Humana's President and Chief Executive Officer; and Brian Kane, Chief Financial Officer, will discuss our first quarter 2021 results and our updated financial outlook for 2021. Following these prepared remarks, we will open up the lines for a question-and-answer session with industry analysts. Joe Ventura, our Chief Legal Officer, will also be joining Bruce and Brian for the Q&A session. We encourage the investing public and media to listen to both management's prepared remarks and the related Q&A with analysts. Additionally, we have posted supporting materials to our Investor Relations page related to the Kindred at Home transaction announced last night. This call is being recorded for replay purposes. That replay will be available on the Investor Relations page of Humana's website, humana.com, later today. Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in our latest Form 10-K, our other filings with the Securities and Exchange Commission, and our first quarter 2021 earnings press release as they relate to forward-looking statements and to note, in particular, that these forward-looking statements could be impacted by risks related to the spread of and response to the COVID-19 pandemic. Our forward-looking statement should therefore be considered in light of these additional uncertainties and risk along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our Investor Relations site. Call participants should note that today's discussion includes financial measures that are not in accordance with Generally Accepted Accounting Principles or GAAP. Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. Finally, any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. With that, I'll turn the call over to Bruce Broussard. Bruce Broussard: Thank you, Amy, and good morning, and thank you for joining us. Today, we reported adjusted earnings per share of $7.67 for the first quarter of 2921, and reaffirmed our full-year 2021 adjusted EPS guidance of $21.25 to $21.75. Our first quarter results reflect solid performance across each of the company's segments fueled by strong individual Medicare Advantage and state based membership growth and improved profitability in the group and specialty and healthcare services segments. As we continue to navigate the pandemic, we also meaningfully advanced our strategy during the quarter. I want to congratulate our Medicaid organization on this significant contract award in Ohio, which when combined with recent additions of Oklahoma, South Carolina, and Wisconsin brings our Medicaid footprint to seven states. These additions affirm our capital efficient organic growth strategy and further demonstrates the strength of our Medicaid capabilities built on our Medicare Advantage chassis. We also continue to deliver a compelling dual special needs plan membership growth. increased approximately 23% in the quarter, and we now serve more than a half a million . We remain committed to proactively addressing disparities in health care for underserved populations, and recognize them Medicare Advantage and Medicaid plans are uniquely positioned to address the needs of these members. Data shows that Medicare Advantage is continuing to grow as the preferred option for those who are low income and for racial and ethnic minorities, with more than 28% of Medicare Advantage beneficiaries being racial and ethnic minorities, as compared to 21% in Traditional Medicare. Currently, 55% of Latino and 39% of African American beneficiaries have actively chosen to enroll in MA, and there is growing diversity in enrollment because of the value provided to beneficiaries. The ability of MA plans to adapt to change and drive innovation and better clinical outcomes is why today nearly 27 million seniors have chosen MA over original Medicare. Our ability to drive innovation and improve clinical outcomes is enabled by our strong integrated care delivery platform. And in recent years, we have significantly expanded our healthcare service capabilities from primary care to pharmacy to home care and more, in order to better serve our medical members and to significantly strengthen our payer agnostic care offerings. These services help deliver on the promise of better quality and health outcomes, lower costs, and a simpler more personalized experience for the people they touch. These advancements also provide a solid foundation to ultimately serve individuals beyond our MA membership base, including original Medicare fee for service members as we continue to evolve and expand beyond managed care to a broader clinical services orientation, but the ability to manage risk and coordinate care outside of MA. Brian Kane: Thank you Bruce and good morning everyone. Today we reported adjusted EPS of $7.67, reflecting a positive start to the year across our segments, particularly in light of the impact that the pandemic has had on our results, which we outlined on our fourth quarter 2020 earnings call in February. While the first quarter came in modestly ahead of our previous expectations, it is early, and we are continuing to work through uncertainty related both to our revenue and claims due to the pandemic. Specifically as it relates to revenue, given our significant exposure to Medicare Advantage, we are disproportionately affected by COVID’s impact on Medicare Risk Adjustment or MRA. Our risk adjusted revenue is determined by 2020 , medical utilization, and resulting documentation, which as previously discussed was materially depressed last year. Operator: Thank you. We have our first question come from the line of Matthew Borsch from BMO Capital Markets. Your line is open. Please ask your question. Matthew Borsch: Yes. Good morning. I was hoping maybe you could elaborate a bit on the increased competition that you're seeing in the group Medicare Advantage area, what you think is driving that and how you think that might settle out? Bruce Broussard: Sure, I'll take that. Good morning, Matthew. Matthew Borsch: Good morning. Brian Kane: Well, as we mentioned, it really – several calls, the group MA market, particularly on the large scale accounts has continually become more competitive. There are several players who you know well who are pursuing these accounts. And, you know, they're obviously attractive pieces of business, their large membership, significant revenue. And you know, there are positive knock on effects as well to winning these accounts, in the local markets in which we operate with respect to providers, etcetera and visibility. And so, there's a lot of competition for these accounts. We remain very well positioned there. Our Group MA team has really been very smart about how they've underwritten these accounts. We're not going to chase accounts down to profitability levels that we don't think are sustainable. And so, we're being prudent and thoughtful as we pursue these opportunities, but again, feel very good about how we're positioned in Group MA notwithstanding the competition there. I would note one thing though, that at the smaller group account size or mid level accounts and small level accounts, the profit margins are better, and more attractive from a profitability perspective. Bruce Broussard: We are trying to – just to add to Brian's comment, we are trying to differentiate through the service component of that and we do find as a result of employers being responsible for the selection of this. That's an important differentiation. It’s not always going to win over price, but we've found a number of accounts that has won over price. Matthew Borsch: Thank you. Operator: We have our next question come from the line of Robert Jones from Goldman Sachs. Your line is open. Please go ahead. Robert Jones: Great, thanks for the question. I guess, maybe just one on the headwinds and tailwind and appreciate the qualitative commentary around utilization and COVID testing and treatment. Just wanted to see if those ranges you had laid out last quarter around those headwinds are still, kind of how you're seeing the world one quarter in? And then on the tailwind side, I know you were looking at the sequestration relief of I think just one quarter, last quarter, and now with it being pushed out to the end of the year, just wanted to get your latest thoughts on how that’s being contemplated within the updated guide? Thanks. Brian Kane: Well, I would say that the ranges that we laid out in the fourth quarter call are consistent with what we're seeing today. And so we remain within those ranges. And again, that's, you know, I think, why we're comfortable, obviously reiterating the guide that we've put forward today. The sequestration clearly is positive from an earnings perspective. But I think we have to consider that in the context of the overall headwinds and tailwind that we see over the coming nine months. And so while that certainly, as we mentioned in our remarks, is a positive tailwind to offset any potential pressure that we might see over the coming months. You know, it's still very early. And so that's why we reaffirm today. Robert Jones: Got it. Appreciate it. Best of luck, Brian. Brian Kane: You bet. Operator: Our next question comes from the line of Justin Lake from Wolfe Research. Your line is open. Please go ahead. Justin Lake: Thanks. Good morning. First, let me wish Brian, good luck as he moves on. And thanks for everything over the last seven years Brian. It's been a pleasure. And then my – I wanted to follow-up based on Bob's question here, just, kind of to narrow it down a little bit, you know, my read of, kind of your updated view on 2021, is that, you know, you feel more comfortable about offsetting the headwinds that you kind of lined out in January given where trends coming in, plus that benefit of sequestration and that the remaining swing factor here, is that risk adjustment true up in June? Am I thinking about that correctly first? And then if so, any thoughts on how wide the outcome could be on that true up? And then lastly, can you tell us how you're doing with recapturing risk scores for 2022? Thanks. Brian Kane: First of all, Justin, thank you for the comments. You know, with respect to – we'll start with risk adjustment. You know, obviously, there are ranges of outcomes, and you know, it could be material, and so, you know, I would say as we think about, you know, potential headwinds and tailwinds that is one that we're very mindful of. And it's something that, you know, as I said to the last question, the sequestration is helpful, but it's still early. And so, you know, I would say that we're sort of in similar posture as we were last quarter at this time. There are headwinds and tailwinds that we that we look at. And we want to be, I think, pretty cautious as we head into the last five months of the year, because there's still a lot of uncertainty. And clearly, MRA is an important element of that, but there's also the claim side, which we have to see unfold over the next nine months. And we obviously have assumptions about how claims are reverting to baseline levels, which they seem to be doing, sort of in-line with largely as we expected. I would say, you know, non-patient, maybe a little bit faster, but you know, sort of in the range and inpatient in-line COVID coming down faster. So that's obviously a positive. So, there are a few puts and takes in those numbers, but I think there's a bit of a ways to go before obviously, we're fully comfortable there. As it relates to the documentation for 2022, as I mentioned, we are feeling reasonably good about what we're seeing so far. It still is early, but the documentation codes do seem to be coming in, in a way that makes us feel good about 2022. We've been effective in getting into the home through our in-home assessments program. We ramped those up pretty meaningfully and so that I think is a positive sign for 2022, but we also will be cautious as we price 2022 and run, you know range of scenarios to understand what the various eventualities may be on both revenue and claims as a result of the pandemic. Bruce Broussard: Yeah, Justin, maybe I can just reiterate what Brian is saying. You know, we obviously had a good quarter and I would say that we, as Brian has said, as we’re early into this we’re looking at the assumptions we made in setting out the year. And this is, you know this is a good growth year for us, which can be in excess of 15%. And we just want to make sure that we see how the rest of the year plays out more before we adjust any of our estimates there. And I think that's probably the best thing that investors should take away from, is that we still are confident in what we've put out there as an assumption side, but it's the first quarter of four quarters here. Justin Lake: Thanks for the color. Operator: We have our next question come from the line of A.J. Rice from Credit Suisse. Your line is open. Please go ahead. A.J. Rice: Hi, everybody and best wishes, Brian as well. It's been great working with you. Just maybe I'll go and ask about the Kindred asset. You know, as you describe the way you're calculating that 11 times purchase price, I may not be thinking about it rightly, but if it's 3.2 billion of revenues, and 11 multiple that you pay, given your purchase price, it was implied, sort of operating EBITDA of about 645 million. I wondered if that was the right way to think about it. And then if you got clarity on how you're going to get rid of the hospice businesses that had open for sale, is it a spin off? And will that hospice business then be able to get back into adult home care and compete with Kindred or is there limitations on that hospice business? Bruce Broussard: A.J., I'll take the latter question and then Brian can just verify the multiple side. We are in the early stages of spinning it off. So there is definitely a commitment of us to spin it off. Our intentions would be to move down the road of possibly an IPO, but there's long ways between here and there and we understand that this is a great asset. As an asset it is a leading hospice asset in the marketplace. It is, you know, it's got great operations from an operating point of view, strong management team. And so, I think it is going to be an asset that is going to have a lot of interest from multiple different buyers so to speak. We haven't worked out the contractual terms of can they re-enter into the home, home business, I think even if they were to do that, it is a fragmented industry, but it is also an industry that, as you all know, because of the legalities of licensure issues and being able to get a home health license isn't the easiest thing in the world, especially both in and to get a Medicare reimbursement side. So, we do believe that there's various entry and just getting into the business. So, we're less worried about that. Brian Kane: Yeah, I would say A.J. on the EBITDA that's, you're broadly thinking about it right, in terms of the numbers. A.J. Rice: Okay. Okay, thanks a lot. Operator: We have our next question come from the line of Kevin Fischbeck from Bank of America. Your line is open. Please go ahead. Kevin Fischbeck: Okay, great. Thanks and thanks, Brian, for all your help over the years. But I guess, I still struggle a little bit with this guidance number. You know, we were coming up with the sequestration benefit being, you know maybe as much as . And so, I guess, this lower visibility, I guess, today than when you had, you know, last year, or we provided guidance for Q4 is a little surprising to me, it's not necessarily something that I'm hearing from the other managed care companies. I just want to hear a little bit more about why you think there is still so much, you know, lack of visibility in that number at this point, even though Q1 came in better where there was good PPD and now you've got a big sequestration tailwind, it seems like that uncertainty would have to be significant. And then if it is significant, you're still reaffirming this number as your base for thinking about 2022, you know, how can you feel comfortable that you would be able to fully reprice that into next year? Bruce Broussard: Well, I guess there's a lot in that question. I would say first of all, in terms of our confidence for pricing next year, I mean we, as I said in my remarks, we're going to reflect any uncertainty that we see in to ensure that there are, you know, any issues that we can contemplate here with respect to various scenarios that may play out, we would have considered in our bid. So, I think that's the first thing. So $21.50 you know, from a pricing perspective we feel very good about. We also feel good about the reiterating guidance that we provided today. I would say, relative to perhaps some of our peers, we have a much higher concentration of Medicare revenue. And Medicare claims, which I think in many respects, particularly in the revenue side have more volatility, but on the claim side as well, you're making assumptions about how seniors who have not used the health care system for a long time, how they're going to respond to the next, you know, call back half of the year. And in that regard, we just want to, we think it's appropriate to be cautious about how they might use the system in the back half of the year, especially as we saw, again, the depressed utilization in the fourth quarter, how does that all play through. And so that's, I think, appropriate caution. As we said, the sequester benefit is beneficial for obvious reasons. So, that is clearly a tailwind by understanding how impactful on our revenue numbers, the last fourth quarter was is still out there, in particular, because the way the mid-year payment works is it rolls forward, for the last six months of the year, in terms of how we get paid, and understanding of the documentation codes that were collected is something that we really need to understand, you know, both on existing members, as well as, frankly, new members. We get a lot of new members every year. Remember, it's not just the net growth, but it's just the number of new sales that we have. And so from that perspective, there's uncertainty there. Again, I feel pretty good about where we are today, but we don't think it would be appropriate to change our guide. The last point I'd make is, we came into the year committed to our 16% growth rate, which was above our target. And that's, you know, that's where we continue to be. We, you know versus perhaps some of our other peers, those numbers have not modified. And we obviously put out a number of ranges on a number of variables here, which, you know, are a reasonable amount of uncertainty starting from the fourth quarter. And as I mentioned that continues, but again, I think the first quarter is a good quarter, but there’s still ways to go. Kevin Fischbeck: Okay great. I assume, just real quick, when you say that you'll know the number when you get the payment from CMS mid-year, does that mean with Q2 results, but you kind of have the answer, you know, the coding benefit will be know and then sequestration will come in and we would expect an updated guidance for Q2 event, is that how to think about it? Bruce Broussard: Well, depends, I mean, possibly, I mean CMS changes, you know, each year exactly when they give the mid-year payment. My guess is, we will have visibility by the second quarter call, but there's no guarantees, but I would say most likely by the second quarter call, we will have some visibility into our mid-year MRA payment. Yes. Kevin Fischbeck: Okay. Thank you. Operator: We have our next question come from the line of Josh Raskin from Nephron. Your line is open. Please go ahead. Josh Raskin: Thanks. Good morning. I'll echo the congratulations as well as the thanks for Brian as well. So my question is just on the segmentation, and what does it look like? What does the, you know, the segments for Humana look like if we think, you know, sort of three years out, I'm interested in both, sort of organizational operational structure of a company, but also reporting and I’m really concentrating on, kind of what businesses you are going to be included in? I don't know what you'll call, sort of a non-insurance segment, it sounds like most of the branding is going towards care well, and sort of, what sort of disclosures and thoughts you guys have on that? Bruce Broussard: Let me start and I’ll ask Brian to add. You know as we are building a healthcare services division, I think component, which will, you know will have – start out with our pharmacy business, which is the largest part of the business, our primary care business will be part of that. And our home health business will be part of that and then we'll have some other health care services area there over time. Those would be the three primarily large driving profitable arms of the organization there. They will serve multiple different markets. They will serve our existing members and be integrated with our existing members through technology and the service component of that. They will also serve in when in the appropriate area. Medicare fee for service areas such as direct contracting would be an example of that. And they will serve other providers, I mean, other payers, as we do today in value based payment models, and we'll take full risk. So, the opportunity we have is to take advantage of the – in the organic growth of each of those markets, to be able to then integrate those together and take advantage of offering a value-based offering two different payment mechanisms whether it's within MA to other payers or within a direct contracting area. And then in addition, it's also the opportunity for us to serve our existing members there. And so, I think you'll see the CenterWell segment the just evolving to be the – our healthcare service segment. Josh Raskin: And are there short-term thoughts on increased disclosures or rebranding or re-segmentation? Bruce Broussard: I think with the entree onto with Kindred, I think we will have to bring in other discussions there. And I think that probably as we close on Kindred, you'll probably see enter the 2022 you'll probably see more enhanced statistical side of the operational aspects of our healthcare service division. Brian Kane: Yeah, and I would just add that just in terms of what we disclose today on the healthcare services side, as Bruce said, you know a lot of our revenue today is in our company because of the pharmacy segment. And obviously, CenterWell primary care has, it is a payor-agnostic business and has external revenue, which we'll see in Kindred though, because it's not like payor-agnostic, but also, obviously serves the fee-for-service program, it will be a lot of, you know, that $3.2 billion of revenue, you know a good proportion of that is obviously non- Humana’s. So, you'll see more disclosures there and we’ll provide more, you know, operating metrics around that as well. So, I think you will get enhanced disclosure. We try to be very transparent with investors in our various businesses and I think you'll continue to see that going forward. Josh Raskin: Perfect, thanks. Operator: We have our next question come from the line of Dave Windley from Jefferies. Your line is open. Please go ahead. Dave Windley: First I wanted to focus on utilization, looking specifically in the retail segment we're estimating that maybe the impact of the HIF and the net increase in this year or maybe about the same size. And so, if I neutralize those out, your MLR on, kind of an apples to apples basis for the first quarter would have also been up about 100 basis points, is that right? And then as you think across the balance of the year, how are you thinking about utilization coming back in terms of acuity and then any permanency in terms of shifts and things like that that would impact intensity in medical costs as the year progresses? Thanks. Brian Kane: Yes. So let me start with the MER question. The way I would think about it year-over-year is, we were about 110 basis points above last year. The difference in PYD was about . Coincidentally, also 110 basis points, so call that 220. The HIF and memory, you have to tax affect it because we did give some of that back to members, it composes a good portion of that 220. And I would say, the group phenomena that we call about and the PDP mix is not insignificant in terms of impacting the MER. So I would, if you want to do an apples to apples incurred basis, I would actually say, the MER got better year-over-year if you exclude prior periods, and you just do it on an incurred basis, other than, like I said, you know, the group MER, as we expected, and as we price for it, you know, I think that does have an impact on the overall margin in the retail segment, as I think we've discussed on the last call. With respect to your utilization bouncing back, we do assume as we mentioned that there will be – we expect to bounce back utilization, we are starting to see that, again, in-line with what we've expected, particularly on the inpatient side as more people are using the hospital facilities in particular, but they are still below par. We do expect the utilization of the system to run at or perhaps a little bit above par as the year continues. We're not seeing increased acuity as yet, although, as I mentioned, with respect to both 2021, but also 2022, we just want to be mindful of how acuity or “long haulers” might play into our cost base, particularly for later this year, or next year. And so, we're definitely mindful of that, as well as any just general bounce back and utilization in the system. And then on the side of service side, we'll see where it goes. We have seen a decline in SNF usage, and that's moved into the home, which I think also, frankly, helps validate the thesis behind the Kindred transaction, just as more and more cares is taking place into the home and as Bruce outlined in his remarks, doing everything we can to make the home a much more comprehensive setting where care can be delivered. And so, I think our belief is that will continue whether members are more shy or shy away from the institutional setting, or I would say that . Operator: Excuse me. This is the operator. I apologize, but there will be a slight delay in today’s conference. Please hold and the conference will resume shortly. Thank you for your patience. Brian Kane: Okay. David, are you still there? We are on the call. Dave Windley: Yes, I am still here. Brian Kane: Sorry about that. We’re in a conference room here and something just happened. We don’t know what it is. So, I'm not sure where I got cut off. I heard a little beep. I think it was right around where we're talking about site of service, site of care, is that where we got cut off? Dave Windley: Site of service. Yes, you were. Brian Kane: Okay. I tell you, when I said it was actually very profound, so I’m going to see if I can repeat it again this type with feeling. So… Dave Windley: You were on a role. Brian Kane: Okay. I’m going out with a bang here. So, on the site of service side, it's, we will see what happens in terms of whether seniors are less comfortable about using the institutional setting. We think it's possible that that could happen. It's certainly not something that we're going to underwrite in our – either assumptions this year or bid assumptions next year, but it's possible. Amy Smith: Did you hear this missed comment? I want to make sure that when that cut off. Dave Windley: I’m sorry, what ? Brian Kane: We are seeing, I think you went for the SNF comment we are seeing lower skilled nursing claims and that people are using the home in that regard that validated – one of the validation points of the Kindred transaction. Hopefully you heard that part as well. Dave Windley: Got it. Very good. Thank you. And best of luck, Brian. Thanks. Brian Kane: Thanks, Dave. Appreciate it. Amy Smith: Next question, please. Operator, are you on the line? Operator: Yes. Your next question comes from the line of Scott Fidel from Stephens. Your line is open. Please go ahead. Scott Fidel: Hi, thanks. Good morning. And I'll just echo my best wishes, and thanks to Brian as well. And question – I know, it's been a theme throughout the call just around some of the trends that you saw in the first quarter and then keeping the guidance unchanged, but did want to just throw in a bit to group in specialties and looks like you actually achieved considerably more earnings in the segment in the first quarter relative to the full-year, reaffirmed guidance for that segment. So, I think that in particular looks just pretty conservative right now. So, and obviously that's a segment that's not really exposed to this uncertainty around the risk adjusted dynamic in Medicare. So, just maybe a little insight into that in terms of, still just wanting to see how utilization ultimately develops or are you planning on, sort of leading into that tailwind to increase your investments within that sector? Brian Kane: Well, thanks for the question Scott. Thanks for the comments. I mean, I think you're reading it, right. I mean, we're very, you know, pretty bullish on how group and specialty is doing this year. It is early. They do not have the same types of, you know, headwinds that Medicare does, certainly on the revenue side, but it is early. The prior year development was a positive note. The incurred results that we've seen, we feel good about. The specialty results are also doing well, specialty, meaning dental. And I think the military business is having a good start to the year. So, really all elements of our strategy are on course, and the financial performance, I think is showing, but as you rightly point out, it's still very, very early. And so we want to see a few more quarters develop. Scott Fidel: Got it? And Brian, just are there targeted investments that you would look to lean in on that, or is the scenario where the trends continue to look like that’s where you could ultimately revise the guidance around that for the year? Brian Kane: You know, I would say that that you're probably more leaning towards more earnings in this segment than investments. We've built in investments into our guide already. And then there are things around the edges that we would always do in a good year just to shore up the segment for future success and something that we really want to do because we think there's, we think there's really a lot of growth in this segment potential and really an opportunity to disrupt the current market as it exists. There's a lot of appetite to do that among our customer base and so we will be prudent as we look to make investments, but I think if you said there are meaningful outperformance on the earnings side, we would imagine that that would flow through. Scott Fidel: Okay. Thank you. Operator: We have our next question come from the line of Ralph Giacobbe from Citi. Your line is open. Please go ahead. Ralph Giacobbe: Thanks. Good morning. I was hoping to just flesh out the group MA commentary a little bit more hoping you could frame the magnitude of the pressure from that alone. Because if I heard right, Brian, I think you said that was actually better year-over-year, so pretty sizable jump in group MA, and then it sounds like that's more of a premium issue than a cost issue. So, I guess how does that get fixed at this point? Thanks. Brian Kane: Okay, I wouldn't have characterized it as a problem. I would just say to Matt’s initial question that the market is more competitive at the high-end of the range, and these are large accounts. So – and just given the high PMPM premiums, you could have pretty significant revenue dollars here at lower margins. And so, I wouldn't call it a problem. I would just say, when you look at the overall retail segment MER, I think it's important to normalize for some of the impacts there. And so, if you sort of strip that out and you look at, sort of year-over-year, I think we're – from an MER perspective in a pretty good position. And so, I wouldn't want to quantify it specifically or meant to say, I think, you know, anything not made up by the sort of HIF, including the tax benefits, some of which we pass through, with the group MER impact because of the lower, bidding on the lower margin levels for these large accounts, as well as frankly, the continued decline of PDP, which also, as we've talked about has, you know, the way the MER dynamics works with, I think you know impacts the first quarter in a way that would also effectively more to year-over-year. So, we feel good about the year-over-year comparison, but again, I wouldn't get too, too caught off in the in the group MA, MER specifically, but rather just an overall commentary on the competitiveness in that one segment of the market. And so it's just something that we're mindful of, and we continue to be very thoughtful about how we price there. Ralph Giacobbe: Okay, fair enough. Thank you. Operator: We have our next question come from the line Ricky Goldwasser from Morgan Stanley. Your line is open. Please go ahead. Ricky Goldwasser: Yeah, hi. Good morning. So question around, sort of how you think about build versus partner, you know, at home is clearly closely aligned with telehealth and remote monitoring. So when you step back and you think about company investment that you need to make in that area, do you think that telehealth is an asset that you should buy or that's sort of something that you can partner with someone on? Bruce Broussard: On the telehealth side, first we will . I think the technology side we would be leasing it or via someone who would lend it to us. We feel that that technology is frankly will be a commodity over time, so that I just want to break down the different parts of telehealth. The second aspect is from who the providers are in there and we always see there is different channels there, one of the partners and our provider value based relationships that we have. Most of them already have telehealth and so we don't need to provide that to them. In our clinics, we today have telehealth and we are utilizing a few different technology platforms and so we are offering that and that's, you know, so we are in that business, but it's through our provider businesses. And then providers that are needing telehealth, we will partner on a with some technology company to offer that that's probably less than a minority part of our telehealth business. The first two will be the majority. And so, I would answer the question, that we don't need a partner. It would be more of a vended solution to offer the technology where we will offer or our partners will offer through our contractual relationships on the provider side. Ricky Goldwasser: And my second follow-up question is on the synergies for the acquisition, I think you talked to one of the areas is the in-sourcing, the home health episodes from other providers, I know that in a deck, you talk about 1.1 billion in spend for Humana ended overall it’s kind of 19% of episodes are currently managed by Kindred and then 45% in some select market, so should we think about the opportunity of in-sourcing kind of going from 19% overall to 45%? Is that sort of a good proxy to think about that? Bruce Broussard: I mean, that could be a proxy. I would say that we're not putting any estimates out there, but our intention is to continue to penetrate in the markets, in the markets that we operate and the nice thing about the Kindred asset is it has 65% overlap with for the organization. So, we have a lot of markets that we can go into, but your math is an estimate, but I would also just like I think – our capacity to cover that, because we're not in 100% of our markets. Ricky Goldwasser: Thank you. Amy Smith: Thank you. Next question please. Operator: We have our next question come from the line of George Hill from Deutsche Bank. Your line is open. Please go ahead. George Hill: Yeah. Good morning, guys. And Brian, I'm excited to see where you pop-up in your next endeavor, and I want to wish you well. I guess just as we think about the Kindred and CenterWell initiative stepping back, can you guys talk about your outlook for the regulatory environment and provider risk hearing? And simplistically speaking, it seems to be a more benevolent regulatory environment than the core MA business and should create a better opportunity for returns in the ? Bruce Broussard : I would say from a customer point of view, the regulatory side, because just there's a significant amount of regulation around how we approach the customer and certain rules and compliance around how we service the customer. So, I would say from the insurance component, you would be right. But within each of the care models there is regulatory. I mean there is compliance regulatory, there's, you know, there's obviously licensure requirements, billing and etcetera. So, I would say and it follows a more traditional provider oriented fashion, regulatory environment. But I wouldn't say it’s a free reign here, I would say that it has the proper caveat around it. George Hill: Okay. Amy Smith: Next question, please. Operator: Our next question comes from the line of Lance Wilkes from Bernstein. Your line is open. Please go ahead. Lance Wilkes: Yeah. I certainly wanted to thank Brian as well. And on the Home Health business, could you just talk a little bit about how you're looking at the home care delivery models with physicians like the Heal and Dispatch sorts of models? And would that be the sort of thing if you expanded into that that would be integrated into that business or would it be separate? And I guess, similarly, this frail, elderly, and programs like pace, kind of something you contemplate within this home health segment are those other sorts of business ones? Bruce Broussard: The nice thing about the home channel that we're developing, they have multiple different markets to go into. They're just so – if at the appropriate time pace makes sense, and we can make that market. I think going to that market, our big focus was how do we get geographic coverage? And obviously the Kindred distribution of nurses really provides us that opportunity as serving in different markets. Where they reside in the organization today, Heal and Dispatch relationship resides within our Home Solutions Group, but it is closely aligned with both of the plan and closely aligned with our primary care strategy. Because what we find is the best solution are the ones that are integrated together where the plan is integrated with the provider side, the provider, the primary care is integrated with both going into the home, the clinics, and the home care offerings that we have. So, I would say that it does reside in the Home Solutions area, but the way we operate it is really and the goal is to have it integrated in the markets that we serve. Lance Wilkes: Great, thanks. Operator: Our next question comes from the line of Frank Morgan from RBC. Your line is open. Please go ahead. Frank Morgan: Good morning. Just curious, as part of your capital strategy around this spin off, would you contemplate placing leverage on the spin? I mean, it looks like if you're 300 and some odd million of EBITFA in the hospice side of the business, you could put quite a bit of debt or a couple of terms of debt. So, just curious your philosophy about how you would capitalize the SpinCo? And then secondly, what is it about the hospice and personal care business that makes it more suitable for a partnership arrangement as opposed to ownership, is it just geographic overlap, is it just valuation, what specifically could you say about the reason for that? Thanks. Bruce Broussard: While I take the first one, Brian can talk about the capitalization side. What we find is the palliative – the integration on palliative and hospice is very powerful and being able to offer both of those in an integrated fashion really creates the opportunity for us to partner across the hospice business as opposed to having one vendor so to speak in that. The second thing, hospice is much more fragmented than Home Health, although Home Health is quite fragmented, hospice is much more fragmented. So, our ability to offer hospice in multiple markets, you're going to have to partner anyway. And so what we we've – I think we found a very dangerous solution here where we can still be have a significant relationship with Kindred hospice through a minority ownership, and be able to then utilize that as a opportunity to integrate in the markets that they're at and integrate palliative as part of that, but still have the flexibility to offer it in a broader fashion. Obviously, as we think about where our priorities of capital and where we put capital, you know we were going to put it in the areas that had the most impact and where we can have the most opportunity for growth and we see home having a platform that has multiple different platforms to grow. And so when we think about capital deployment and efficiency of capital, I know, Frank, you've been following us a long time. I think you can say that that is a area that we're constantly looking at as not only the businesses we're in, but also how do we continue to generate above average returns, and the way where we deploy that capital as important to that. Brian Kane: And just to add on the capital question, there's no doubt that hospice is a company that we can leverage. And so it's not something we'll disclose today, but we do intend to put that on the we spend it. And so stay tuned for that. You are correct. Frank Morgan: Thank you very much and congratulations. Brian Kane: Thank you. Operator: And there are no further questions at this time. I'll turn back the call over to Bruce Broussard. Sir, please continue. Bruce Broussard: Thank you. Just to conclude the call, I’d like to just make a few comments. I think first, there's been a consistent question around, you know, basically, why didn't we raise earnings to be completely honest with you, be direct here. We have had a strong first quarter, but we are early in the year. I just want to re-emphasize that we continue to see the trends that we put in the first quarter as being continuing, but we want to make sure that we are able to see those trends through a longer timeframe before we make any kind of adjustments in our estimates there. And I hope the investors take that away. It's much more around – it’s just earlier, as Brian has said early in the game here. The second thing as many of you have said, I thank Brian for his just wonderful contribution over the seven years he's been here and I know he'll show up some place in healthcare and I think you'll – I'm sure that each one of you will invest in what he does on his next goal there. So, because he has delivered a lot of value to our shareholders and to our members and to our associates there. And then third, the quality of our earnings, our strategic advancement this quarter and over the many quarters previous to this couldn't have been accomplished without our 50,000 associates that are working every day on behalf of each one of you, and our providers and our customers there, and I want to thank them for that. So thank you and I hope everyone has a great day. Operator: This concludes today's conference call. Thank you all for participating and you may now disconnect. Have a great day.
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Barclays Adjusts Humana Inc. Rating and Price Target Amid Legal Challenges

  • Barclays has updated its rating on Humana Inc. to Equal-Weight from Overweight and increased the price target to $370 from $326.
  • Humana faces legal challenges regarding allegations of misleading investors about the impact of increased medical costs on its adjusted earnings per share.
  • Despite these challenges, Humana's stock price has shown resilience, trading at $349.55 with a market capitalization of approximately $42.12 billion.

On Thursday, June 20, 2024, Barclays made a significant move by adjusting its rating on Humana Inc. (NYSE: HUM), a leading health insurance provider, to Equal-Weight from its previous stance. This change suggests that Barclays now views Humana's stock as a hold option for investors, indicating a neutral outlook on the company's future stock performance. The adjustment was notable not only for the change in rating but also for the increase in the price target to $370, up from $326, as reported by TheFly. This revised price target reflects an optimistic view of Humana's potential for growth, despite the challenges it faces.

The timing of Barclays' updated stance on Humana comes amidst legal challenges for the company. The Gross Law Firm has issued a notice to Humana shareholders, particularly those who purchased shares between July 27, 2022, and January 24, 2024. This notice is in relation to a lawsuit alleging that Humana made false and/or misleading statements and failed to disclose important information regarding the impact of increased medical costs on its adjusted earnings per share. These increased costs were attributed to a pent-up demand for healthcare procedures, leading to higher utilization rates and costs than the company had previously assured its investors.

The lawsuit claims that Humana downplayed these significant financial pressures, which could have misled investors about the company's financial health and future prospects. This situation underscores the importance of transparency and accurate reporting in maintaining investor trust and confidence. As Humana faces these allegations, the potential impact on its stock performance and investor relations is a critical concern, especially considering the recent downgrade by Barclays.

Despite these challenges, Humana's stock price has shown resilience, trading at $349.55, which represents a decrease of 1.60% from its previous close. The stock has experienced fluctuations, trading between a low of $349.19 and a high of $358.17 during the session. Over the past year, Humana's shares have seen a wide range of trading prices, from as high as $530.54 to as low as $298.61. With a market capitalization of approximately $42.12 billion and a trading volume of 664,596 shares, Humana remains a significant player in the health insurance market.

The legal challenges and the revised outlook from Barclays highlight the complex environment in which Humana operates. Investors and shareholders are closely watching how these developments will impact Humana's financial performance and stock valuation in the coming months. The increased price target from Barclays suggests some optimism about Humana's ability to navigate its current challenges, while the lawsuit underscores the importance of addressing the concerns raised by shareholders.

UBS Adjusts Rating on Humana to Underperform

  • UBS downgraded Humana's to underperform while maintaining a hold position, with a current stock price of $356.20.
  • Humana's collaboration with Privia Medical Group-Georgia and Bamboo Health aims to enhance care coordination for Medicare Advantage plan enrollees, receiving a Points of Light Award for its innovative approach.
  • Despite the underperform rating, Humana's efforts to improve healthcare through technology and partnerships could offer a long-term positive outlook for investors.

On Monday, May 20, 2024, UBS adjusted its rating on NYSE:HUM, Humana, to Underperform, maintaining a hold position. At the time of the announcement, the price of Humana's stock was $356.20. This update was covered in detail by Benzinga, with insights from 14 analysts on the matter. Humana, a prominent player in the healthcare insurance sector, has been making significant strides in improving care coordination for Medicare Advantage plan enrollees. This effort is part of their broader strategy to enhance healthcare outcomes and patient satisfaction, which could influence their market performance and investor sentiment.

Humana's collaboration with Privia Medical Group-Georgia and Bamboo Health has been a key initiative in this strategy. This partnership, recognized for its innovative approach to bridging care gaps through real-time data, received a Points of Light Award at the 2024 K2 Collaborative Summit, hosted by KLAS Research. Such recognition underscores Humana's commitment to leveraging technology for better healthcare management, a factor that could play a crucial role in its valuation and the perception of its stock in the market.

John Cope, Director of Stars Technology at Humana, highlighted the importance of this collaboration in enhancing the healthcare experience for Humana members. By integrating Bamboo Health's Real-Time Care IntelligenceTM, the partnership aims to deliver personalized, high-quality care experiences. This initiative not only demonstrates Humana's dedication to its members' healthcare journeys but also its potential to lead in the adoption of innovative healthcare solutions. This could be a pivotal aspect for investors to consider, especially in light of UBS's recent rating adjustment.

Despite the recent underperform rating by UBS, Humana's innovative efforts in care coordination and its recognition in the healthcare community could present a different picture to investors. The company's stock, currently trading at $355.75, has shown resilience with a year's trading range between $298.61 and $530.54. With a market capitalization of approximately $42.87 billion and a trading volume of 164,771 shares, Humana remains a significant entity in the healthcare insurance industry. Its commitment to improving patient care through technology and partnerships may well influence its market performance in the long term, offering a nuanced perspective to investors beyond the immediate impact of analyst ratings.

Humana Drops 5% Despite Q1 Beat

Humana (NYSE:HUM) saw its shares drop by around 5% intra-day today despite the announcement of its fiscal Q1/24 results, which surpassed analyst expectations in both earnings and revenue. The company reported an earnings per share (EPS) of $7.23 for the quarter, significantly above the consensus estimates of $6.12. Revenue also exceeded expectations, totaling $29.33 billion compared to the forecast of $28.52 billion.

While Humana adjusted its GAAP EPS forecast for the full year to $13.93, down from the previous estimate of $14.87, it maintained its adjusted EPS guidance at $16.00. Additionally, the company raised its 2024 outlook for individual Medicare Advantage membership growth. Humana now anticipates an annual increase of about 150,000 members, or 2.8%, which is an adjustment upward by 50,000 members from its previous projection.

Humana Shares Drop 11% on Disappointing Guidance

Shares of Humana (NYSE:HUM) experienced a significant drop of more than 11% today following the health insurance company's release of its 2024 profit guidance, which significantly underperformed analyst expectations.

Humana projected its adjusted earnings per share (EPS) for 2024 to be around $16.00, starkly lower than the consensus estimate of $26.09. The company attributed this outlook to the expectation that the higher Medicare Advantage medical costs seen in the fourth quarter of 2023 will continue throughout 2024.

Regarding its fourth-quarter performance, Humana reported an unexpected loss per share of 11 cents, in contrast to the anticipated $2.15 by analysts. However, the company did exceed revenue expectations, recording $26.46 billion for the quarter, which is higher than the forecasted $25.6 billion.

Humana Drops 11% on Profit Guidance Cut

Humana (NYSE:HUM) revised its profit forecast downward today, following adjustments in its projections for individual Medicare Advantage (MA) growth for the year ending December 31, 2024.

The revised expectations now point to an addition of approximately 100,000 new members, translating to a 1.8% growth from its membership tally as of December 31, 2023, which stands at around 5.4 million. This updated projection falls short of the company's previous goal of achieving growth "at or slightly above the industry average," as initially stated.

In response to this announcement, Humana's shares experienced a sharp decline, dropping over 11% intra-day today.

The company attributes this moderated growth outlook for 2024 to its strategic approach of balanced pricing, which has led to capturing a smaller portion of the overall industry growth. Although the total sales volume during the Annual Enrollment Period (AEP) aligned with Humana's expectations, a significant portion of this volume stemmed from existing members changing plans. This resulted in fewer new member sales than anticipated, as detailed in Humana's recent filing.

Humana Beats Q3 Estimates, Provides Guidance

Humana (NYSE:HUM) posted impressive third-quarter results, outperforming Wall Street analysts’ predictions. The company announced an adjusted EPS of $7.78, beating the projected $7.16.

Additionally, the quarter's revenue stood at $26.42 billion, beating the anticipated $25.57 billion. Bruce D. Broussard, Humana’s President and CEO, remarked on the robust earnings growth and highlighted a 19% rise in their individual Medicare Advantage membership.

However, for the full year 2023, the company expects an EPS of about $28.25, slightly lower than the expected $28.30.

Humana’s Investor Day Review, Guidance Raised

Analysts at RBC Capital raised their price target on Humana Inc. (NYSE:HUM) to $544 from $541 following the company’s Virtual Investor Day meeting on Thursday.

Management updated its outlook, raising its 2022 adjusted EPS guidance to $25.00 from $24.75, reflecting 21% year-over-year growth. Management cites continued favorable Medicare and Medicaid cost trends as seen through the first half of the year, as well as a lack of incremental headwinds from COVID baked into prior guidance.

The company expects adjusted EPS to reach $37.00 in 2025, representing a 14% CAGR, which is near the upper end of the company’s prior 11-15% long-term EPS growth target.