Humana Trying to Rebuild

Rough 2024 Humana as they report Q3 of 2024... Look to 2025

Introduction

Humana reported earnings on Wednesday before the market opened, marking the fourth earnings release among the "Big Six Payor" companies. Humana's stock is down 45% year-to-date, so good news has been scarce in Louisville. The stock saw an initial jump but has since settled back to its pre-earnings price—essentially a tie in soccer terms. However, with a new CEO, Jim Rechtin (who replaced Bruce Broussard), there is a renewed focus on long-term shareholder value. Rechtin opened the call by outlining four basic drivers for the business, aiming to reset expectations and steer the company toward sustainable growth. Below are the key takeaways from the call.

Four Drivers

Jim Rechtin, as the new CEO, is rallying the organization around four key drivers to create long-term shareholder value at Humana. This theme was revisited several times during the call.

1. Product Experience: Deliver a product that is well-priced and meets consumer expectations.

2. Clinical Excellence: Achieve clinical excellence to drive industry-leading margins in the Medicare Advantage (MA) space.

3. Manage Back Office: Enhance efficiencies throughout the organization to accomplish more with fewer administrative resources. They are budgeting a 30 basis point decrease in costs for 2025 by leveraging technology and AI to drive efficiency. For example, they've cut the time spent documenting clinical calls in half using an AI tool that records discussions with members.

4. Deploy Capital: Allocate capital to drive revenue in the Medicare Advantage arena, focusing on CenterWell and Medicaid businesses. Rechtin mentioned that CenterWell Primary Care can provide sufficient value in the current lower reimbursement setting, which will be explained further in the CenterWell PCP section.

Medicare Advantage