Humana 2012 Annual Report Download - page 109

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
not be estimated based on observable market prices, and as such, unobservable inputs were used. For auction rate
securities, valuation methodologies include consideration of the quality of the sector and issuer, underlying
collateral, underlying final maturity dates, and liquidity.
Recently Issued Accounting Pronouncements
There are no recently issued accounting standards that apply to us or that will have a material impact on our
results of operations, financial condition, or cash flows.
3. ACQUISITIONS
On December 21, 2012, we acquired Metropolitan Health Networks, Inc., or Metropolitan, a Medical
Services Organization, or MSO, that coordinates medical care for Medicare Advantage beneficiaries and
Medicaid recipients, primarily in Florida. We paid $11.25 per share in cash to acquire all of the outstanding
shares of Metropolitan and repaid all outstanding debt of Metropolitan for a transaction value of $851 million,
plus transaction expenses. The preliminary fair values of Metropolitan’s assets acquired and liabilities assumed at
the date of the acquisition are summarized as follows:
Metropolitan
(in millions)
Cash and cash equivalents .......................... $ 49
Receivables, net .................................. 28
Other current assets ............................... 40
Property and equipment ........................... 22
Goodwill ....................................... 569
Other intangible assets ............................ 263
Other long-term assets ............................. 1
Total assets acquired .......................... 972
Current liabilities ................................. (22)
Other long-term liabilities .......................... (99)
Total liabilities assumed ....................... (121)
Net assets acquired ........................... $851
The goodwill was assigned to the Health and Well-Being Services segment and is not deductible for tax
purposes. The other intangible assets, which primarily consist of customer contracts and trade names, have a
weighted average useful life of 8.4 years.
On October 29, 2012, we acquired a noncontrolling equity interest in MCCI Holdings, LLC, or MCCI, a
privately held MSO headquartered in Miami, Florida that coordinates medical care for Medicare Advantage and
Medicaid beneficiaries primarily in Florida and Texas.
The Metropolitan and MCCI transactions are expected to provide us with components of a successful
integrated care delivery model that has demonstrated scalability to new markets. A substantial portion of the
revenues for both Metropolitan and MCCI are derived from services provided to Humana Medicare Advantage
members under capitation contracts with our health plans. In addition, Metropolitan and MCCI provide services
to Medicare Advantage and Medicaid members under capitation contracts with third party health plans. Under
these capitation agreements with Humana and third party health plans, Metropolitan and MCCI assume financial
risk associated with these Medicare Advantage and Medicaid members.
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