In a conference call Monday morning, Aetna Chief Executive Officer Mark Bertolini said the Connecticut-based company expects to maintain Humana’s more than 12,000-person local workforce — and possibly increase it — after its proposed $37 billion acquisition of the Louisville company is approved by federal regulators.
Company officials said Friday that Aetna’s Medicare, Medicaid and TRICARE businesses would be headquartered in Louisville. Those account for more than 50 percent of Aetna’s projected operating revenues post-acquisition.
Responding to a question from a financial analyst, Bertolini said that presents a strong case for keeping the workforce here intact.
“Louisville will be an important site for us, and we anticipate, given the size of the revenue at that location, that we’ll at least maintain employment if not increase it,” he said. He also said he expected some senior leadership to remain in Louisville, given the significance of the government businesses to Aetna’s bottom line.
Humana CEO Bruce Broussard said on the call Monday that the acquisition would strengthen the company’s “transition from sick care to health care,” part of a trend away from the fee-for-service model seen market-wide in the wake of the Affordable Care Act. He was optimistic about his company’s workforce integrating into Aetna.
“I believe Humana employees will feel energized and motivated by Aetna’s strategy and culture,” Broussard said.
Also on the call Monday, Bertolini said the Humana brand would remain after the acquisition is completed, another positive sign for deal-watchers curious about the future Humana footprint in Louisville, where it is the second-largest private employer. Aetna officials indicated on Monday it was likely Humana’s commercial business operations would move to Hartford, Conn., while that company’s government business operations would come to Louisville.
In a presentation to investors, Aetna said it expects to realize $1.25 billion in synergies annually, beginning in 2018, as a result of the deal. Aetna Chief Financial Officer Shawn Guertin said on the call Monday that approximately $1 billion of that would come from reductions in operating costs, although he declined to provide details.
Humana has 57,000 employees across the U.S., some of whom could lose their jobs as a result of those synergies. At a news conference on Friday, Mayor Greg Fischer said he hopes the sale will be a “net positive” for the city. Importantly, “net” implies some transition costs are likely, but that future growth could make up for them eventually.
University of Louisville finance professor David Dubofsky said the companies would seek to cut labor costs and streamline other parts of their businesses as well.
“Other operating expenses, besides labor savings, could include reduced real estate expenses and technology savings involved in producing and selling their product, medical insurance,” he said.
As IL first reported, Humana has more than 1.6 million square feet in local real estate holdings, most prominently the iconic Humana building downtown, and it leases another 1.3 million square feet.
Officials from both companies expect the deal to close in the second quarter of 2016. It will face what is likely to be a strict review from federal regulators. Company officials declined to speculate on the federal review process during the call on Monday.
Update: The original version of this story said Aetna CFO Shawn Guertin made the comment about Louisville’s workforce, an assertion that was confirmed by a spokesman for Humana before IL posted the story. An Aetna spokeswoman now says it was CEO Mark Bertolini who made the comment. The speakers did not identify themselves during the Q&A portion of the call.