Humana’s Array of Primary Care

Credit Suisse https://www.credit-suisse.com hosted Humana https://www.humana.com at investor meetings in Denver Colorado, and Kansas City Missouri. Visits were made to Humana’s standalone “Partners in Primary Care” (PIPC) clinic in Independence Missouri, and the “Partners in Primary Care” clinic joint venture inside of Walgreens https://walgreens.com in Raytown Missouri.

PIPCs provide a full array of primary care and holistic primary care to Medicare Advantage (MA) members, as opposed to an urgent care center or to a freestanding emergency room. Humana’s primary care model is focused on a value-based revenue model which is paid a percentage of premiums as opposed to FFS professional fees.

The clinics are payer agnostic clinics for repeatability (i.e., franchise model). The intent is to go into markets that are less mature as a MA marketplace. These markets are located in communities that typically are underserved but where the disease burden is higher than average, and where social determinants of health are unman-aged.

The company consults with plans to find locations with care gaps as well as leveraging third party data. Clinic patients who will benefit the most are those with serious chronic conditions such as COPD, CHF, and diabetes. PIPCs are particularly effective managing the care of seniors with multiple co-morbidities.

Currently Humana has six PIPC centers (two located in Walgreens) in the Kansas City area with two more both located in Walgreens, are expected to open late 2019. Humana also has a PIPC in North Carolina and five PIPCs in South Carolina plus four more (one located in a Walgreens) is expected to open late 2019. In addition, Humana has a PIPC in Orlando via an acquisition plus three PIPC Centers in the Houston Texas area are expected to open in the next several months.

The question is how many patients can one doctor manager? This was discussed in terms of the number of patients each provider can be accountable for which is referred to as panel size.  A large clinical practice may have three physicians which are able to see 550-750 patients although Walgreens PIPCs may have a smaller panel size. Panels typically include a care coach, referral coordinator, social worker, behavioral health specialist etc.

The care coach is typically a registered nurse and helps patients understand issues they face, develops a long term plan with patients, conducts follow-ups, gets patients involved in educational activities concerning their health, etc. Care coordinators help patients’ access financial resources that they may need for their care such as inhalers and more nutritious meals. Some Walgreens PIPC locations have a separate pharmacist beyond the Walgreens pharmacist.

Part of Human’s strategy is to tie to a hospital such as St. Luke’s in Kansas City by utilizing a narrow network arrangement to include a PIPC. Humana is one of ten payers that PIPC works with across its care delivery organization. The company hopes to flip health plans to capitated risk models after two to three years of using the PIPC model. The company also believes a full risk model would receive better information from health plans to provide better care to those patients.

Humana highlights that it has done a good job of recruiting the right type of physicians to PIPCs as the company offers competitive compensation for their employed physicians relative to the market they are operating in. The physicians are salaried and are not owners in the episode of care, but do receive bonuses related to quality and outcome metrics.

The company is upbeat about its performance in MA this year, as well as their prospects for continued strong performance next year. Despite the return of the Health Insurance Fee, Humana expects to grow Earnings per Share at a reasonable rate next year off their 2019 base of $17.25.

Humana is developing a business process transformation program, to include cost reductions to be unveiled with 3Q19. Stronger than expected MA enrollment growth this year has created an earnings tailwind for 2020 as these members swing to profitability.

Humana is very pleased with their Medicaid wins in Florida and Louisiana. Louisiana is seen as a particularly big win, as Humana was the second highest-rated plan with their rating based highly on clinical capabilities, population, network management, social determinant efforts etc.

Specialty services including clinics, home health provisions, and Pharmacy Benefit Managers (PBM) are emerging as a further growth driver. The clinic business is expected to be a growth driver going forward, including the 40 or so PIPCs. However, over time, the company does not expect to own all of the PIPC centers and may use outside capital to grow the business as the model is perfected, much like a franchise model.

Humana expects by the year end to have a financial interest or full ownership of some 265 physician and primary clinics achieved PBMs through Conviva https://www.conviva.com, JenCare https://www.jencaremed.com, plus other entities. The company is evaluating the changing the PBM landscape with a view toward taking advantage of emerging opportunities. The company is open to adding to their specialty capabilities by buying access to limited distribution drugs and is considering deals involving smaller PBMs with interesting capabilities.

The company does not know when the Texas STAR+PLUS Medicaid RFP will be awarded but is cautiously optimistic about their prospects. Also, Humana also expects an announcement of the Kentucky Medicaid RFP soon.

To sum up, Humana seems comfortable with the current range of 2020 estimates. Also, since the company lacks substantial large employer commercial exposure, this seems to insulate the company from the uncertainty created by discussion of Medicare for All and Medicare buy-in except in the unlikely outcomes in where MA would be impacted.

For more information or to provide feedback, email A.J. Rice at aj.rice@credit-suisse.com or call 212-325-8134.