BlackRock Acquires WCAS Stake in Humana's CenterWell Joint Venture

Humana has announced a new joint venture with funds and accounts managed by HPS Investment Partners, a unit of BlackRock, covering nearly 150 CenterWell Senior Primary Care clinics. Under the agreement announced Tuesday, BlackRock will acquire Welsh, Carson, Anderson & Stowe's (WCAS) equity stake, valued at approximately $2.8 billion. CenterWell will retain a minority interest and continue managing and operating the clinics.

Transaction Details and Ownership

The transaction is expected to close in the fourth quarter, subject to regulatory approvals and customary closing conditions. While BlackRock will hold the majority ownership stake in the joint venture, CenterWell remains responsible for the day-to-day management and operation of the clinics.

According to the companies, the new venture replaces existing partnerships with WCAS. "As part of the transaction, BlackRock will acquire WCAS's current equity ownership, valued at approximately $2.8 billion, with modifications to terms reflecting the maturity of the business today compared to when the legacy joint ventures were formed," the companies said in a statement.

Dr. Sanjay Shetty, president of CenterWell, said in a statement, "We look forward to this new venture with BlackRock as our partner, while our growing network of CenterWell clinics remains dedicated to serving patients with our unique model of senior-focused, value-based care."

Financial Impact and Future Operations

Humana stated that it expects the arrangement to lower its cost of capital and reduce balance-sheet liabilities. However, according to an SEC filing, CenterWell may have to compensate BlackRock if its investment returns fall below an agreed minimum. Despite this, Humana expects the related liabilities to be significantly lower than under the previous arrangements.

The venture plans to use additional capital over the next two years to support existing operations, open new clinics, and pursue acquisitions. CenterWell has the option to begin purchasing clinics from the venture in 2028. If CenterWell has not acquired all clinics by the end of 2033, BlackRock can initiate a sale process for the remaining clinics, with CenterWell entitled to submit the first offer.

Humana reaffirmed its 2026 forecast of at least $9 in adjusted earnings per share. The company noted that its GAAP earnings guidance could change as it completes its third-quarter financial close and accounts for strategic initiatives, including the reduction in liabilities tied to the WCAS put arrangements.

Strategic Context

This marks Humana's second strategic transaction with BlackRock this year. Earlier, Humana agreed to sell all or substantially all of its minority stake in Gentiva to an investor consortium that includes BlackRock.

Humana has been expanding its CenterWell healthcare services business, which operates primary care clinics for older adults. CenterWell Senior Primary Care currently operates 250 clinics in at least a dozen states. In February, Humana purchased Florida-based MaxHealth from Arsenal Capital Partners for an undisclosed sum, adding 54 primary care clinics to its network.

The company is also reshaping its insurance business to improve profitability. In July, Humana said it planned to exit some of its least profitable Medicare Advantage markets in 2027, affecting an estimated 600,000 members. The company identified a sustainable margin of at least 3% as its top priority while continuing to expand CenterWell.

Why it matters

The deal allows Humana to reduce balance-sheet liabilities and lower its cost of capital while maintaining operational control over its senior primary care network. By replacing the WCAS partnership with BlackRock, Humana aims to unlock additional growth capital for CenterWell's expansion, which includes opening new clinics and acquiring existing practices. This move aligns with CEO Jim Rechtin's vision to transform Humana into a "consumer healthcare company" while navigating profitability challenges in its core insurance business.

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Sources

• healthcarefinancenews.com: Humana partners with BlackRock to finance CenterWell clinics | Healthcare Finance News
• finance.yahoo.com: Humana’s In New $2.8 Billion Partnership With BlackRock To Grow CenterWell Clinics

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.