Humana to Acquire Clinic-Based Practice for $790 Million

Health insurer Humana Inc. will acquire a privately held Texas-based provider of occupational and wellness services in a cash transaction valued at $790 million.

Concentra, based in the Dallas-Fort Worth area, provides occupational medicine, urgent care, physical therapy and wellness services to workers and the general public at more than 300 medical centers in 42 states.

According to Humana, nearly 3 million of its insureds live near a center run by Concentra, which also operates more than 240 work site medical facilities.

Humana Chairman and Chief Executive Michael B. McCallister said in a statement the acquisition fits within his company's consumer-focused strategy.

"We are excited about the opportunity to acquire a strong stand-alone business that reinforces our core businesses while providing both revenue diversification and opportunities for strategic long-term expansion," McCallister said.

Concentra has annual revenues of $800 million. Subject to regulatory approvals, the deal is expected to close in December.

A letter from Concentra CEO Jim Greenwood published on the company's website, explained that Concentra's unique business model, its geographic footprint and service infrastructure, and continual business innovation have been attractive characteristics for investors.

Concentra will operate with the same leadership team under the Concentra brand as business units within the Humana enterprise, Greenwood said. He said most clients and patients should see only minor changes and experience no disruption in service.

Humana (NYSE: HUM) is the second-biggest seller of Medicare Advantage plans for seniors in the United States. Second-quarter net income had increased 20.7% to $340 million, while total revenues rose 9.5% to $8.6 billion. It has about 10.3 million medical members (BestWire, Aug. 27, 2010).

The A.M. Best Co. said Monday that Humana's financial strength ratings, issuer credit ratings and debt ratings will remain unchanged, along with those for its insurance and health maintenance organization subsidiaries. A.M. Best said the acquisition will provide a source of business diversification for Humana, along with unregulated cash flows (BestWire, Nov. 22, 2010).

During the afternoon of Nov. 23, Humana's stock was trading at $57.00 a share, down 2.3% from the previous close.

Humana Health Plan Inc. currently has a Best's Financial Strength Rating of A- (Excellent).

(By Al Slavin, senior associate editor, BestWeek)