Humana 2012 Annual Report Download - page 54

• Effective March 31, 2012, we acquired Arcadian, a Medicare Advantage HMO serving members in 15
U.S. states, increasing our Medicare membership by approximately 62,600 members and expanding
our Medicare footprint and future growth opportunities. To obtain antitrust approval in connection with
the Arcadian acquisition, we entered into a consent agreement with the United States Department of
Justice that required divestiture of overlapping Medicare Advantage health plan business in eight areas
within Arizona, Arkansas, Louisiana, Oklahoma, and Texas. Accordingly, we divested 12,600
members effective January 1, 2013.
• During 2012, we were successful in our bids for Medicaid business in Ohio, Illinois, and Kentucky,
including individuals dually eligible for both the federal Medicare program and the state-based
Medicaid program in both Ohio and Illinois. We partnered with CareSource Management Group
Company to serve the Ohio and Kentucky individuals under a March 2012 strategic alliance agreement.
Employer Group Segment
• Fully-insured group Medicare Advantage membership of 370,800 at December 31, 2012 increased
80,200 members, or 27.6%, from 290,600 at December 31, 2011 primarily due to the January 2012
addition of a new large group retiree account.
Health and Well-Being Services Segment
• 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.
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.
• On July 6, 2012, we acquired SeniorBridge Family Companies, Inc., or SeniorBridge, a chronic-care
provider of in-home care for seniors, expanding our existing clinical and home health capabilities and
strengthening our offerings for members with complex chronic-care needs.
Other Businesses
• On April 1, 2012, we began delivering services under the new TRICARE South Region contract that
the Department of Defense TRICARE Management Activity, or TMA, awarded to us on February 25,
2011. The new 5-year South Region contract, which expires March 31, 2017, is subject to annual
renewals on April 1 of each year during its term at the government’s option. The TMA has notified us
of its intent to exercise its option to extend the TRICARE South Region contract through March 31,
2014. We account for revenues under the new contract net of estimated health care costs similar to an
administrative services fee only agreement. Our previous contract was accounted for similar to our
fully-insured products.
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