Humana Leaders Signal Slower Centerwell Growth Pace
The leaders of Humana Inc. will continue to invest in expanding the company’s Centerwell primary-care, home-health and pharmacy services division but President and CEO Jim Rechtin on Feb. 11 signaled that growth capital will be a little harder to procure in the quarters to come.
Speaking to analysts and investors after Louisville-based Humana reported its fourth-quarter results, Rechtin said his team’s top priority is rebuilding the profitability of the company’s core insurance business, including by reversing last year’s steep drop in its star quality rating. That, he said, “will require being prudent with our balance sheet.”
That means a slower pace of growth for Centerwell, which finished 2024 with about 350 clinics and nearly 400,000 patients in its primary care network after adding 48 locations and 100,000 people compared to the end of 2023.
For the coming year, however, Rechtin and his team are planning to add 20 to 30 clinics in key markets—which could include acquisitions—and between 30,000 and 50,000 patients to those numbers. Those forecasts equate to growth rates less than half those of 2024.
Still, Rechtin said growing Humana’s ability to generate more profits via reinvestment in existing ventures as well as acquisitions remains important.
“This is clearly a second priority, but it is a priority nonetheless,” he said. “Both CenterWell and Medicaid are important enablers of our long-term strategy. We will be thoughtful in identifying opportunities that make sense in our current environment.”
In the fourth quarter of last year, the Centerwell group of businesses generated an operating profit of $327 million on a little more than $5.1 billion in revenues. Those numbers were down 16 percent and up 9 percent, respectively, from the last three months of 2023. Executives said growth in profits was hampered by revisions to the risk adjustment model the Centers for Medicare and Medicaid Services uses.
Humana as a whole posted a net loss of $862 million on revenues of more than $29 billion as its medical loss ratio ticked up to 92.1 percent versus 91.5 percent in the prior-year period. Like several of their insurance peers, Humana’s leaders are squaring up to the higher patient care costs they have seen for much of the past two years. That includes improving clinical outcomes and building back the company’s star rating, new CFO Celeste Mellet said, but it also means the leadership team is focused on improving Humana’s long-term planning processes.
“We have to be a lot more proactive in our decision making and planning to be much more flexible,” Mellett said. “We need to be better at making trade-offs really creating the capacity […] for the most important things. We need to be ruthless about stopping things that are not driving better outcomes for our members and better returns for our shareholders.”
Shares of Humana (Ticker: HUM) fell about 3.5 percent to $257 and change after the Feb. 11 earnings report and conference call. Over the past six months, they have lost roughly 26% of their value, a slide that has trimmed the company’s market capitalization to about $31 billion.
