Humana's earnings slip, but top line performance impresses

Managed care insurer Humana reported its earnings sank 3.5 percent in the fourth quarter 2012 from the previous year, but beat both its own and analysts projections.

Despite the lower earnings, the company showed continued growth in a number of areas. Quarterly revenue increased 5.5 percent to $9.5 billion, while medical membership grew by 8 percent to 12.1 million. Foruth quarter earnings were $192 million, or $1.19 a share , down from $199 million ($1.20 per share) in the fourth quarter of 2011.

For the full year 2012, Humana reported revenue increased 6 percent to $39.13 billion from $36.83 billion in 2011. 2012 earnings per share were $7.47, down from the $8.46 for 2011, though 2012 earnings beat management’s guidance, estimating 2012 would fall in the $7.25 to $7.35 range, and far outpaced analysts’ expectations projecting $1.06 per share earnings in the fourth quarter according to estimates compiled by Thomson Reuters.

In tandem with a focus on integrated care, via its HMO business, Humana has made several acquisitions and signed home care services contracts that, executives said, positions the company to address chronic care medical spending over the long-term.

With the $850 million acquisition of Metropolitan Health Network, a 50 physician network in Florida, and the purchase of the IT firm Certify Data Systems, Humana is investing heavily in integrated care for Medicare Advantage, one of its core businesses. Humana CFO Jim Bloem said HMO enrollment has grown to its largest size since 2006, when Congress last adjusted Medicare Advantage, and now covers about half of its 2.1 million Medicare Advantage members.

Humana CEO Bruce Broussard, the former CEO of McKesson Speciality Health, took office in January, and said he thinks integrated care “represents the future of healthcare delivery.” For 2013, he said the company is focused on using HMOs and IT analytics to help drive efficient care and reduce administrative costs.

Through a contract with Matrix Medical Networks, a teams of nurses are visiting Humana Medicare Advantage members at homes or in care facilities, as part of a $50 million risk assessment initiative.

Talking with investors, Humana executives said the goal is to get chronic members on a managed care program quicker and to focus on early intervention and chronic care management. Last year, Humana CFO Bloem noted, the enrollment in the company’s special chronic care plan increased 13 percent to 150,000.

Amid questions about recent studies finding high Medicare Advantage disenrollment among seniors with chronic illnesses, Humana executives said the integrated model is designed to engage the sickest populations. "We're seeing continued tenure of our relationship with our customers to be in the 7-year range," Broussard said, "and we continue to see them aging with us."

Humana is also getting started with several state health programs, with Medicaid managed care contracts in Kentucky, Ohio and Illinois and two dual eligible demonstrations.