Dive Brief:
- Humana said it plans to cut costs to reinvest $1 billion back in its core business, Medicare Advantage. The "value creation plan" will include "optimizing" its workforce, and significantly rationalizing its real estate portfolio as the pandemic has driven a shift in work trends. Executives didn't clarify what the optimization, a term often associated with layoffs, will entail on a Wednesday call with investors.
- As part of this plan, Humana is undertaking a "critical" review of strategic initiatives to target its investments in areas with the greatest value. It will also look at reducing third-party spend, decreasing its use of vendors in some areas while outsourcing in other areas.
- Humana is accelerating previously announced plans to divest its hospice business, which it acquired last year as part of its Kindred acquisition.
Dive Insight:
The valuation creation plan is intended to give a boost to Medicare Advantage business and "return to industry leading membership growth," in the segment, Humana CEO Bruce Broussard said Wednesday on the call. The payer is currently second in MA market share.
Earlier this year, the Louisville, Kentucky-based insurer slashed forecasts for 2022 MA enrollment, which sent shares tumbling at the time. On Wednesday's call, executives said MA membership is expected to be flat for the year.
Broussard blamed the muted growth on members actively shopping for new plans, creating churn in the industry.
As part of the $1 billion reinvestment plan, Broussard said he's focused on optimizing marketing and sales spending to maximize growth.
As part of this bid, Humana will invest in its healthcare service capabilities to improve member retention.
The news comes on the heels of a reported loss in the fourth quarter, when the omicron variant began its surge across the U.S. Humana's healthcare services segment, which includes its pharmacy and provider services, was its only profitable unit in the fourth quarter, according to its latest financial results.
As it previously stated, Humana will sell off the hospice unit it acquired through its acquisition of home-health giant Kindred. As it advances plans to divest the business, Broussard said the company has started to "reorganize the hospice business for standalone operations."