EQUITY METHOD INVESTMENT

12 Months Ended

Dec. 31, 2019

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 as "Equity method investment in Kindred at Home" in our consolidated balance sheets, with our share of income or loss reported as "Equity in net earnings of Kindred at Home" 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 starting at the end of year three and ending at the end of year four following the closing. 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 at the end of 2022 and ending at the end of 2023 following the closing. 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 final purchase price allocation resulted in approximately $1 billion being allocated to the investment and $236 million and $291 million allocated to the put and call options, respectively. The fair values of the put option and call option were $28 million and $557 million, respectively, at December 31, 2019. The fair values of the put option and call option were $224 million and $246 million, respectively, at December 31, 2018.

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, 2019 and 2018 of $(506) million and $33 million, respectively, are reported as "Other (income) expense, net" in our consolidated statements of income.

The summarized balance sheets at December 31, 2019 and 2018, and income statement for the year ended December 31, 2019 and period beginning July 2, 2018 through December 31, 2018 of Kindred at Home were as follows:



Balance sheets	December 31, 2019		December 31, 2018
	(in millions)
Current assets	$	563	$	536
Non-current assets	4,967		4,955
Current liabilities	405		351
Non-current liabilities	2,637		2,708
Shareholders' equity	2,488		2,432

Statements of income
	For the year ended December 31, 2019		July 2, 2018 through December 31, 2018
	(in millions)
Revenues	$	3,100	$	1,587
Expenses	2,835		1,451
Net income	54		27