November 22, 2010 at 4:57 PM CST - Updated June 22 at 2:57 PM
LOUISVILLE, Ky. (AP) - Health insurer Humana Inc. plans its first broad foray into health care delivery in nearly two decades with its intended purchase of Concentra Inc. in an approximately $790 million cash deal announced Monday.
Concentra, a privately held health care company based in Addison, Texas, delivers occupational medicine, urgent care, physical therapy and wellness services from more than 300 medical centers in 42 states.
Nearly 3 million Humana medical members live near a Concentra center.
Humana Chairman and CEO Michael B. McCallister said Concentra "brings solid experience across a number of fronts that fit well" with Humana's 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 expansion longer term," McCallister said in a release.
Besides its medical center locations, Concentra also serves employer customers by operating more than 240 worksite medical facilities.
Concentra earns about $800 million in annual revenue. Humana projects that the acquisition will add slightly to its earnings for the year ending Dec. 31, 2011.
The transaction still has to gain regulatory approval but is expected to close next month.
Humana stock added $1.90, or 3.4 percent, to $57.93 in morning trading Monday.
Humana, with about 10.1 million medical members and 7 million specialty members, is the fifth largest publicly traded health insurer based on membership. It offers Medicare Advantage, Medicaid and commercial coverage as well as insurance for military members and their families.
For Humana, the deal signals that the health insurer is branching back into its origins as a health care provider, but the new business would still amount to just a fraction of its overall revenue.
Louisville-based Humana began as a nursing home company in 1961, then expanded into the hospital business in 1968. It sold its nursing home business in the mid-1970s.
Humana entered the health insurance segment in 1984, and was a combination managed care and hospital company until 1993, when the company split in half - resulting in a hospital company and today's Humana. The hospital company was later sold.
Humana spokesman Tom Noland said the deal announced Monday moves the company "into promising new territory." Humana already operates a few clinics in south Florida.
"This builds on our caregiving heritage and offers new opportunity in a growing part of health care," Noland said in an interview. "The demand for primary care services will increase partly as a result of demographic trends, notably the aging of baby boomers, and also because of some of the incentives in the new health reform law."
Concentra CEO James M. Greenwood said, "This combination with Humana is an excellent opportunity to expand service to patients and employers, as well as enhance access to convenient medical care for patients in communities nationwide."
Humana had raised acquisitions like this as a possibility when company officials spoke last week during their investor day meetings, said Les Funtleyder, an analyst with Miller Tabak.
He noted that competitor Cigna Corp. is pushing to grow its international business, and UnitedHealth Group Inc., the largest insurer based on revenue, draws money from several segments outside health insurance coverage.
Funtleyder said he prefers diversification like this. It can reduce exposure to health care overhaul regulations while also giving insurers more ways to access the millions of customers who will gain coverage in the coming years under the overhaul, which was signed last March by President Barack Obama.
"We think that this will be a positive for (Humana) in terms of at least not exposing them to all these things that are happening in the insurance market," he said.
AP Business Writer Tom Murphy contributed from Indianapolis.