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Reference: https://www.fiercehealthcare.com/providers/unitedhealth-outbids-option-care-health-amedisys-33b-deal
On Monday, June 26th, 2023, it was announced that Optum (a United Healthcare company) acquired Amedisys – the second largest home health company in the country – for an estimated $3.7B. Interestingly, Amedisys was already in talks with Option Care, a home care and infusion company, which was recently divested from Walgreens.
A few things to note before we dive into the good, the bad, and the ugly:
Optum’s bid for Amedisys was at $100.00 per share, which is an ~11% premium of the closing stock price
Optum’s deal was all cash – no other securities are being exchanged to our knowledge
Amedisys had recently appointed Richard Ashworth as it’s President and CEO, whose career includes six years as an executive at Walgreens, which as we mentioned, recently divested Option Care
Walgreens parted ways with Option Care after it completed its acquisition of CareCentrix, a home health, DME, home infusion, and post-acute care management company
Optum already owns LHC, which is the largest home health agency in the country
So who are the winners and losers? Let’s start with the losers:
1. Small (“mom and pop”) home health agencies. Now that Optum, which is owned by a health insurance giant, UHC, that effectively pays the majority of the cost of care for members who need care at home, owns about 11% of the home health market, it’s safe to assume that more UHC members will get their home care from one of UHC’s own agencies (LHC and Amedisys). The smaller agencies have also become an even bigger target for consolidation.
2. Other insurers. The cost of business may not change but cost of competition just went up slightly. If you’re Cigna, Humana, Aetna, Elevance, or one of the other national or regional players, you are now reluctantly including home health providers that are owned by one of your competitor in your home health provider network. If you don’t, you risk the possibility of violating adequacy rules. Alternatively you can incur higher costs to build a network that doesn’t include LHC or Amedisys.
3. Option Care. Option Care had two things to gain with this acquisition: (1) vertical integration across the home infusion value chain and (2) access to more patients receiving acute care at home through Contessa Health, an Amedisys subsidiary.
4. Acute care hospitals. Now that UHC ultimately owns nearly 11% of the home health market and a “hospital at home” company, we anticipate their acute admits / 1,000 to decrease, which essentially takes revenue away from acute hospitals.
And the winners are:
1. Amedisys. They got a pretty sweet deal from Optum. Higher than Option Care’s offer and it’s all cash. Cash is still king and now they can invest in growth.
2. UHC. Some may argue that Optum overpaid for the deal, which is a fair argument. However, given the additional benefits UHC will realize from owning nearly 11% of the home health market, this is a no brainer. Keep in mind that Optum also acquired naviHealth several years ago, which is a company that manages post-acute care benefits on behalf of Medicare Advantage health plans. naviHealth’s key strategy is reducing utilization of skilled nursing facilities, which typically increase reliance on home health to ensure best possible patient outcomes.
3. (For sake of argument because we don’t really believe this will come to fruition) UHC members. Over time, Optum will attempt to create integrated networks and offer better care coordination for UHC’s members. This would be a positive because integrated care typically results in better patient outcomes, better patient experience, and lower cost of care.
In the end, UHC comes out winning because they have the cash necessary to make deals like this and handicap their competition. All this, of course, is dependent on the FTC and DOJ approving the deal.
The Covalence Health team
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