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Humana (HUM) Shores Up Government Business With FPG Buyout


Humana Inc. HUM has recently announced that it has completed the acquisition of Orlando, FL-based Family Physicians Group (“FPG”). Financial terms of the deal remain undisclosed.

Humana’s Medicare Expansion

Amid speculations that Humana might be acquired by retail major Walmart, Inc. WMT, the deal is an indication that Humana is not giving up on its strategy of expanding its provider networks.

Humana’s Medicare Advantage business has been strongly delivering owing to operating initiatives that have led to favorable prior-period medical claims development and lower current-year utilization, evident from average 5.5% growth of total Retail Medicare membership in the last four years. Earlier, the company acquired MD Care, which increased Humana’s Medicare Advantage membership strength by approximately 15,000 members.

Shareholders have also gained confidence in the stock, given its strong Medicare membership base and growth potential. In a year’s time, the stock has surged 34.8%, outperforming the industry’s rise of 33.8%.

Why FPG?

FPG is known to be one of the largest at-risk providers serving Medicare Advantage and Managed Medicaid HMO patients in Greater Orlando. The company serves more than 22,000 Medicare Advantage patients including nearly 4,000 Humana members.

The company’s expertise in treating people of Central Florida, especially seniors with chronic conditions, is expected to further fortify Humana’s commitment to helping its Medicare, Medicaid plus government and commercial members achieve their best health.

Humana’s value-based care model revolves around physicians’ utmost efforts to achieve improved health outcomes for patients, lowering medical expenses and transforming health care nationally. The company is aggressively widening its primary care model with intention to establish a national footprint of senior, high-performing, focused primary care physicians.

Moreover, FPG’s comprehensive care management model and proactive medical management initiatives successfully improve patient outcomes at a lower cost. The buyout of FPG significantly supports Humana’s strategy to help physicians and clinicians manage members’ health via a holistic approach.

Peers’ Moves in the Medicare Space

The lucrative nature of Medicare business along with its leading players’ objective to stake a claim in this rapidly growing health insurance market has fueled a series of mergers and acquisitions in the industry.

Cigna Corporation's CI acquisition of HealthSpring and Aetna Inc.'s AET buyout of Genworth’s Medigap business are noteworthy in this respect.

The recent announcement by the Centers for Medicare and Medicaid Services on account of raising 2019 Medicare Advantage reimbursement rate by 3.4% is likely to further boost the potential of Medicare space driving more consolidations.

Zacks Rank

Humana carries a Zacks rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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