Analysts expect the Federal Trade Commission to scrutinize the proposed $3.3 billion deal between UnitedHealth Group’s Optum and home healthcare company Amedisys.
On Monday, Amedisys announced it had accepted an all-cash offer of $101 per share from UnitedHealth Group’s Optum and withdrew from its proposed $3.6 billion all-stock purchase agreement. export with Option Care Health. The announcement comes four months after Minnetonka, Minnesota-based UnitedHealth Corporation closed its $5.4 billion acquisition of home health care company LHC Group. The FTC’s request for additional information delayed that agreement for several months.
Optum said in a press release that it believes regulators will approve its deal with Amedisys. The FTC did not respond to requests for comment.
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Amedisys and LHC Group are the nation’s second and third largest home health agencies by revenue, respectively. While analysts estimate the companies combined account for only about 10% of the highly fragmented home healthcare market, they said this week’s proposed transaction is likely to raise concerns for consumers. FTC.
“When you go into certain geographic markets, there will be overlap between [LHC Group] and Amedisys,” said Scott Fidel, chief executive officer of financial services firm Stephens Inc. said. [for regulatory approval].”
Fidel said the combination could also prompt the FTC to take a closer look at future agreements regarding vertical integration between health insurance and care delivery.
It’s a trend that UnitedHealth Group, Humana and CVS Health have pursued in recent years as Medicare Advantage plans have grown in popularity with the baby-boom generation.
UnitedHealth Group is the nation’s largest health insurer and the largest Medicare Advantage organization by subscription through the United Healthcare business. The company has also acquired physician clinics, a data analytics business, a prescription drug unit, and home health units through its Optum business.
Humana, the nation’s fourth-largest health insurer and second-largest Medicare Advantage organization by subscription, acquired in-home healthcare provider Kindred at Home in 2021 and changed its name. became the CenterWell unit, which also owns primary health care services and pharmacies.
CVS Health owns Aetna, the nation’s sixth-largest health insurer, and the fourth-largest Medicare Advantage organization by subscription. The retail giant also owns pharmaceutical benefits management company CVS Caremark, home health technology and analytics platform Signify Health, and primary care provider Oak Street Health.
Steven Parente, a finance professor from the University of Minnesota’s Carlson School of Management, said the size that vertically integrated corporations have in some markets could lead the FTC to question its ability to price services. and attract workers from other companies.
“Many of these services are really regional, and in some areas they can really eliminate the competition,” said Parente.
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A report in March by the Brookings Institution, a think tank, raised concerns that vertical integration could increase Medicare Advantage plan spending on related goods and services. to businesses owned by health insurance companies.
The Affordable Care Act requires Medicare Advantage plans to spend at least 85% of premium revenue on medical expenses, rather than administrative costs or profits. However, if a plan spends money on services that the parent company owns, those costs can be considered profits, the Brookings Institution said.
However, some analysts say the FTC’s further scrutiny of health care arrangements could make it harder for the Centers for Medicare and Medicaid Services to expand value-based care, involving regarding reimbursement for service quality. CMS has set a goal of moving 100% of Medicare beneficiaries to value-based care arrangements by 2030.
“The degree of integration between physicians, home healthcare, and every other part of the care delivery system,” said Brian Tanquilut, a healthcare equities analyst from Jefferies. Health is what makes value-based care so effective. “The basic thing that CMS means is that we want vertical integration, one way or another.”
