Humana's Improved Full-Year EPS Outlook Driven by Outperformance in CenterWell Pharmacy and MA Membership
Humana raised its 2025 EPS outlook from approximately $16.25 to $17, driven by better-than-expected performance in CenterWell Pharmacy and individual MA membership.
The company highlighted strong progress in these areas, contributing to the revised outlook despite ongoing challenges.
Impact and Management of PAMA Legislation for 2026
The company anticipates a potential $100 million impact if PAMA is implemented next year, with ongoing efforts to delay or mitigate this through legislation and data collection improvements.
Management is working with trade organizations to seek legislative solutions, including delays and data adjustments, to offset the impact.
Base case assumption is that PAMA will come into effect in 2026, but the company is preparing for various scenarios, including offsets via initiatives like LaunchPad.
Revised Financial Outlook and Impact of Portfolio Actions
The company now expects a $6.5 billion increase in 2025 medical costs versus initial estimates, with specific impacts in Medicare ($3.6 billion), commercial ($2.3 billion), and Medicaid.
Approximately $1 billion of previously planned portfolio actions are no longer being pursued, affecting the outlook.
Recognition of $850 million in unfavorable prior period items and one-time settlements, indicating a more challenging financial environment than initially projected.
For the first half of 2025, Practice Collections grew 15.7% to $1.66 billion, Care Margin increased 13.2%, and Adjusted EBITDA grew 33.3% to $55.9 million.
Implemented Providers grew 13.8% year-over-year to 5,125, and value-based lives attribution increased 15.2%.
Medicaid attributed lives grew over 31% year-over-year, with no downside risk taken on these contracts, focusing on upside shared savings.
Privia Health reported strong financial results for Q2 2025, with Practice Collections increasing 18.5% year-over-year to $862.9 million and Adjusted EBITDA rising 31.6% to $29 million, representing 25.2% of Care Margin, a 310 basis point improvement.
The company ended Q2 with over $390 million in cash and no debt, after deploying $95 million for the IMS acquisition in Arizona.
Capital Allocation and Shareholder Return Strategy
The company is committed to returning capital to shareholders through share repurchases and debt reduction, leveraging improved EBITDA and free cash flow.
Management announced a plan to reduce stock-based compensation as a percentage of revenue to mid- to high-single digits in 2026.
The company has no near-term plans for acquisitions, focusing instead on profitability and organic growth.
Leadership emphasizes that profitability improvements will help close the gap between intrinsic and market value, benefiting shareholders.
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