On Monday, UnitedHealth Group* (UHG) subsidiary Optum announced that it submitted an all-cash offer to purchase home health company Amedisys for roughly $3.3 billion. 

Deep dive: 5 partnership models in commercial risk

Optum submits $3.3B bid to purchase Amedisys

On May 26, Amedisys received an unsolicited proposal from Optum to purchase the home health company in an all-cash deal for $100 per share.

Amedisys is currently the second-largest home health provider in the United States, with 522 care centers across 37 states. Under its Contessa subsidiary, the company also offers hospice services and hospital-at-home. 

The Optum-Amedisys bid follows Optum's $5.4 billion acquisition of LHC Group, another large home health and hospice firm, with 964 locations across 37 states. Prior to being finalized, that transaction drew scrutiny from the Federal Trade Commission (FTC).

While experts have noted that Amedisys will need to consider the risk of FTC scrutiny with an Optum-Amedisys deal, they said it could still gain approval because of the fragmented home health market.

A filing submitted to the Securities and Exchange Commission by UHG included assurances from the company that it was "confident it would be able to obtain all necessary regulatory approvals." A separate proposal from UHG "included additional terms relating to regulatory matters and the steps Optum would take to secure regulatory approvals."

Other factors at play

Last month, Amedisys agreed to merge with Option Care Health through an all-stock transaction.

Following UHG's announcement on Monday, Option Care Health released a statement restating the near-term and long-term advantages of its merger with Amedisys.

"Option Care Health's previously announced definitive merger agreement with Amedisys delivers significant value to Amedisys and Option Care Health stockholders, a high degree of certainty in obtaining the required regulatory approvals due to the complementary nature of the parties' businesses, and benefits patients, providers, payers, and care teams," the company said.

However, due to the all-cash nature of Optum's proposal, Wall Street analysts think the UHG deal will ultimately win.

"Once investors get past the FTC risk associated with [UHG]'s bid, its all-cash nature and valuation that puts it above the nominal valuation of the OPCH offer at the time of that announcement" make UHG's offer "compelling, though deal completion will likely take time," said Brian Tranquilut, a Jeffries Equity analyst. (Herman, STAT+ [subscription required]. 6/5; UHG press release, 6/5; Eastabrook, Modern Healthcare, 6/5; Amedisys press release, 6/5)

*Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent. 

What's driving the race to acquire home-based care assets?

By Miriam Sznycer-Taub and Blake Zissman

The news of Optum's bid to acquire Amedisys came as a surprise — but it fits a larger theme of payers, particularly Medicare Advantage plans, looking to acquire assets to build out a home ecosystem.

In recent years, we've seen this play out in a number of ways, with some buyers finding success in their endeavors and others selling off the asset shortly after acquisition. While some buyers, including payers and other providers, have been able to capitalize on owning home health assets, others have struggled to benefit financially.

The drivers

When acquiring a home health agency, payers' objectives are largely centered around operating costs and the ability to refer as many of their patients to these organizations as possible. If the agency is not delivering a return on investment or is unable to refer enough patients, payers are not afraid to divest and reevaluate structure.

Despite these varying outcomes, the race is on to acquire home-based care assets. We suspect there are two main reasons: 

1.  Home-based care is a cost-effective alternative

Payers want to direct their members from acute care back to the home without a skilled nursing stay. Especially for Medicare Advantage patients, there is a financial incentive to avoid sending patients to a skilled nursing facility (SNF).

Amid the push to improve patient quality, SNFs are often seen as a cost center that payers are eager to cut out — leading many to invest in home health agencies and services.

2.  Home-based care operators need to grow their workforce

All home-based care operators, whether part of a payer organization or not, need to grow their workforce. According to our research, this was the number one factor hindering the expansion of home-based care.

By adding Amedisys's workforce to their own existing home-based care workforce, Optum could help overcome this challenge. 

Optum's interest in Amedisys is also notable because of the diversity of services that Amedisys offers. Not only do they support home health, but they also offer hospital at home services through Contessa as well as home-based palliative and hospice care. That's an attractive suite of services for a Medicare Advantage payer interested in offering more care in the home.

What we'll be watching

It's still unclear what will happen with Optum's offer for Amedisys. Even if Amedisys agrees to the acquisition, the deal is likely to face FTC scrutiny. If that does happen, we'll be watching to see whether Optum has to divest from any of Amedisys' assets as part of an eventual deal.

With the continued rise in seniors who require skilled care — most of whom would prefer to age in the home — investments and divestments in the home health space will continue to make headlines.

Moving forward, we'll be paying close attention to the outcomes of larger home health acquisitions by payer organizations. Specifically, we'll be watching to see if they're able to successfully move their members away from facility-based care and into the home, both in terms of quality and the bottom line. 

Payer-provider partnerships will play a significant role in the future of value-based care (VBC). This is especially true for commercial risk, where there is no central body charting the course for clinical and payment models. Without a prescribed roadmap, payers and providers working in the commercial space have a great deal of flexibility to work together on their value-based care goals. Read on to learn about five payer-provider partnership models being applied to commercial populations and why they may be the right or wrong path for your organization.