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Analysis

Humana Benefits from Strong Medicare Advantage Membership in Q4

By Jack O'Brien  
   February 05, 2020

The Louisville-based insurer posted operating cash flows of $512 million for Q4 2019.

Humana reported over $16.2 billion in revenues during Q4 2019, thanks in large part to continued success in the Medicare Advantage (MA) space, according to the company's latest earnings report released Wednesday morning.

The company's earnings per share (EPS) increased from $2.58 to $3.84 in Q4. For the full year, Humana's EPS rose from $12.16 to $20.10.

For Q4, Humana's adjusted pre-tax income again fell, this time from $480 million to $322 million, though its adjusted pre-tax income did rise by $169 million during 2019.

The Louisville–based insurer also posted operating cash flows of $512 million for Q4 2019, up from a negative cash flow of $333 million this time last year.

Humana expects its MA membership to experience an increase of between 270,000 to 330,000 members in fiscal year (FY) 2020.

C-SUITE PERSPECTIVE: 

"We are pleased with our 2019 performance, particularly our success in balancing and executing on multiple priorities as we grew membership, improved the quality and productivity of our operations, and continued to invest in the long-term," Bruce Broussard, CEO of Humana, said in a statement. "You’ll find evidence of these efforts in our improved Net Promoter Score - and in the related, and numerous, awards we received for customer experience. In addition, we had strong membership growth, with a record number of our members now in 4+ Star Plans. All the while, we made appreciable progress in advancing our technology, primary care and home strategies."

Related: Humana Projects 17% Medicare Advantage Membership Growth for 2019

Forward looking, Humana expects its diluted EPS to be between $17.76 and $18.26 for FY 2020.

Humana's earnings were released two days after the company announced plans to form a value-based primary care joint venture with Welsh, Carson, Anderson & Stowe (WCAS), a New York-based private equity firm.

Related: Humana, Private Equity Firm form Value-Based Joint Venture

MA has benefited not only the insurer's bottom line but its beneficiaries as well.

In November, Humana released its annual value-based care report which found that Humana MA members receiving care from physicians in value-based care arrangements saved $3.5 billion in costs.

Related: Humana Cuts $3.5B in Care Costs Through Medicare Advantage

Related: Humana Hires Away Chief Data Officer From Federal Agency

Another development for Humana in Q4 was its agreement to purchase Enclara Healthcare, a Philadelphia-based hospice pharmacy benefit manager (PBM). 

The deal is expected to close during the first half of 2020 pending state and federal regulatory approvals.

Related: Humana to Purchase Enclara Healthcare, Hospice PBM

Following the release of Humana's Q4 earnings report, the company's stock jumped sharply, trading up around 7% during the early morning session.

ADDITIONAL HUMANA Q4 EARNINGS REPORT HIGHLIGHTS:

  • The company's retail segment remained strong, with more than $14 billion in revenues, up more than $2 billion compared to this time last year.
  • Debt-to-capitalization ratio fell from 37.4% to 32% in Q4.
  • Healthcare services segment revenues again topped $6.6 billion and segment earnings jumped by $18 million year-over-year.

For complete financial information, review Humana's filing with the Securities and Exchange Commission.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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