Humana announces earnings, three acquisitions

Humana Inc. on Monday announced third quarter 2012 earnings of $2.62 per share that were slightly lower than its earnings for $2.67 for the same period last year. Nonetheless, the company’s third quarter performance beat both the company’s internal guidance and bettered by a sizable margin Wall Street analyst estimates of $2.05 for the quarter.

The company beat its internal estimates and Street expectations primarily on the reversal of its second quarter report, which showed higher than expected growth in medical costs. As a result, Humana raised 2012 EPS guidance to $7.25 to $7.35.

Along with its earnings report, the company also announced three transactions, as the second largest provider of Medicare Advantage plans continues its plan to build an integrated healthcare delivery system as part of its core strategy to compete in the government sponsored business sector.

The largest deal was the acquisition of Florida-based Metropolitan Health Networks Inc., for $11.25 per share cash and the assumption of Metropolitan’s debt, a deal with a total value of $850 million. Metropolitan is a medical services organization (MSO) that provides coordinated care for Medicare Advantage and Medicaid beneficiaries primarily in Florida.

Humana also announced it had made a non-controlling investment in a second Florida-based MSO, MCCI Holdings, which provides managed care services for Medicare Advantage and Medicaid beneficiaries in Florida and Texas. It also announced the acquisition of HIE technology provider Certify Data Systems of San Jose, Calif. Terms of the MCCI and Certify deals were not disclosed.

“This quarter we take a large step in advancing our strategy of an integrated delivery system, while successfully addressing our second quarter challenges,” said Bruce D. Broussard, Humana president, who will take over as company CEO Jan. 1 from long-time Humana chief executive Michael B. McCallister. “As we look forward to 2013 and further implementation of healthcare reform, we believe capabilities such as relationships, risk-sharing partners, integrated data processes and clinical analytics combined with our national platform will allow us to assist the government, employers and individuals in addressing healthcare costs and improved member experience.”

According to the company, once the acquisition of Metropolitan is complete, Humana via its subsidiaries CAC-Medical Centers Florida and Concentra, which the company purchased last year for $790 million, will have investment in medical centers that have more than 2,300 physicians nationwide.

“We have added approximately 50 primary care physicians and clinicians as well as opened a dozen joint ventures centers over the past year,” noted Jim Bloem, Humana CFO, in the earnings conference call. “This experience combined with today’s announced transactions validates to us that now is the time significantly accelerate and expand this build out.”