HS Healthspring Healthspring Inc. Common Stock

On Wednesday, Humana Inc. (HUM) announced the completion of its acquisition of California-based MD Care. The closure of the deal took less than four months since the announcement in September 2011. The financial terms of the deal were not disclosed.

Humana does not expect the acquisition to significantly affect its 2012 earnings, even though it will boost the company’s Medicare Advantage policyholders by almost 15,000. Although MD Care’s policyholders will now be covered by Humana, they will not face any significant changes in their coverage.

MD Care is a three-year old privately-held Medicare Advantage health maintenance organization that operates in four southern-California counties, namely Los Angeles, Orange, San Bernardino and Riverside. It offers Medicare Advantage medical, prescription drug and special needs plans.

The acquisition of MD Care is a part of a series of purchases announced by Humana in 2011. The company is one of the leading Medicare providers in the US and has been rapidly expanding its business through acquisitions.

In December 2011, Humana announced the acquisition of Antiva Health, a health care analytics company. Before that, in November 2011, the company also inked a deal to acquire healthcare provider SeniorBridge, which offers in-home care to seniors with chronic diseases.

Earlier, in September 2011, Humana’s subsidiary, Concentra Inc., acquired four urgent care medical centers from NextCare Inc., while in August, the company announced the purchase of another Medicare Advantage health maintenance organization, Arcadian Management Services.

Humana is not alone in this acquisition spree. Its peers in the health insurance industry –  such as CIGNA Corp. (CI) and UnitedHealth Group (UNH) – have also been expanding their businesses via acquisitions.

While UnitedHealth announced its plan to acquire XLHealth Corp, a sponsor of Medicare Advantage health plans, in November 2011, Cigna finalized the acquisition of UK-based FirstAssist Insurance Services in December 2011 and announced its intention to acquire HealthSpring Inc. (HS) in October 2011.

Humana currently carries a Zacks #2 Rank, indicating a short-term ‘Buy’ rating. However, considering the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the shares.

 
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