EQUITY METHOD INVESTMENT

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

In the third quarter of 2018, we, along with TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS (together, the "Sponsors"), completed the acquisitions of Kindred Healthcare, Inc., or Kindred, and privately-held Curo Health Services, or Curo, respectively, merging Curo with the hospice business of the Kindred at Home Division, or Kindred at Home. As part of these transactions, we acquired a 40% minority interest in Kindred at Home, a leading home health and hospice company, for total cash consideration of approximately $1.1 billion.

We account for our 40% investment in Kindred at Home using the equity method of accounting. This investment is reflected in Equity method investments in our consolidated balance sheets, with our share of income or loss reported as Equity in net earnings in our consolidated statements of income.

We entered into a shareholders agreement with the Sponsors that provides for certain rights and obligations of each party. The shareholders agreement with the Sponsors includes a put option under which they have the right to require us to purchase their interest in the joint venture beginning on July 2, 2021 and ending on July 1, 2022. Likewise, we have a call option under which we have the right to require the Sponsors to sell their interest in the joint venture to Humana beginning on July 2, 2022 and ending on July 1, 2023. The put and call options, which are exercisable at a fixed EBITDA multiple and provide a minimum return on the Sponsor's investment if exercised, are measured at fair value each period using a Monte Carlo simulation. The simulation relies on assumptions around Kindred at Home's equity value, risk free interest rates, volatility, and the details specific to the put and call options. The fair values of the put option and call option were $45 million and $503 million, respectively, at December 31, 2020 and were $28 million and $557 million, respectively, at December 31, 2019.

The put option is included within other long-term liabilities and the call option is included within other long-term assets. The change in fair value of the put and call options for the years ended December 31, 2020 and 2019 of $71 million and $(506) million, respectively, are reported as Other expense (income), net in our consolidated statements of income.

The summarized balance sheets and statements of income at December 31, 2020 and 2019 of Kindred at Home were as follows:


Balance sheets	December 31, 2020		December 31, 2019

	(in millions)
Current assets	$	844	$	563
Non-current assets	4,858		4,967
Current liabilities	556		405
Non-current liabilities	2,445		2,637
Shareholders' equity	2,700		2,488

Statements of income
	For the year ended December 31, 2020		For the year ended December 31, 2019

	(in millions)
Revenues	$	2,972	$	3,100
Expenses	2,552		2,835
Net income	207		54