Dive Brief:
- Healthcare behemoth UnitedHealth and home health and hospice provider Amedisys have zeroed in on the assets they plan to divest to get federal regulators on board with their $3.3 billion merger.
- UnitedHealth and Amedisys have entered into an agreement to sell certain Amedisys and UnitedHealth medical centers to VCG Luna, a subsidiary of Texas home health and hospice company VitalCaring Group, according to a Friday securities filing.
- The divestiture will only go through if UnitedHealth and Amedisys complete their merger, which was first announced last summer but has been held up amid scrutiny from the Department of Justice. The companies now expect the deal to close in the second half of this year, according to the Securities and Exchange Commission filing.
Dive Insight:
UnitedHealth announced plans to acquire Amedisys in June 2023 for $101 a share in cash, after the Louisiana-based provider reneged on a previous merger agreement with Option Care Health.
However, the timeline for the Amedisys deal was pushed back after the DOJ requested more information on the merger in August. The agency is reportedly considering a lawsuit to block the deal, which state regulators have also been analyzing.
Amedisys and LHC Group, the home health company UnitedHealth purchased for $5.4 billion in early 2023, are both major providers with a footprint in dozens of states, but have minimal overlap in specific markets, according to analysts.
However, the deal has likely gotten swept up in antitrust regulators’ larger concerns about UnitedHealth.
The DOJ is currently investigating the conglomerate for its potential anticompetitive effects, including the relationship between UnitedHealthcare and Optum, its health services arm that includes doctor’s offices.
Progressive lawmakers have also urged regulators to closely scrutinize UnitedHealth’s acquisition of Amedisys, pointing to UnitedHealth’s existing market power in Medicare Advantage and its massive network of physician groups. UnitedHealth employs or is affiliated with 10% of U.S. physicians.
Now, UnitedHealth and Amedisys have agreed to offload select assets in a bid to ameliorate regulators’ concerns about the deal.
Spokespeople for UnitedHealth and Amedisys declined to provide more information on the divestitures, including how many clinics it could give up and where they are located.
However, divested locations will likely be mostly home health centers, not hospice or palliative care locations, because LHC has a larger home health footprint, according to Tyler Giesting, a healthcare and life sciences director at West Monroe.
“My expectation would be that this is primarily a divestment of home health locations where there is a need to reduce the overlap with the existing Optum or LHC Group footprint,” Giesting said, sharing the companies are likely looking to offload a “meaningful number” of clinics.
Earlier this year Amedisys agreed to divest upwards of 100 home health and hospice locations in overlapping markets to address regulators’ antitrust concerns, while UnitedHealth was pursuing the sale of almost 90 Optum locations, according to reporting from The Capitol Forum.
However, that may not be enough to placate the DOJ, according to Giesting.
“It’s going to depend,” Giesting said. “It won’t surprise me if there’s maybe another action or two that they decide to take.”
The locations’ buyer, VitalCaring, was created in 2021 when private equity firms Vistria Group and Nautic Partners rolled up a number of home health and hospice agencies in the South, according to Hospice News.
UnitedHealth, which runs the largest private health insurer in the U.S. and a sizable physician network, has been building out its provider capabilities, including by snapping up home health businesses as patients increasingly search out convenient, low-cost care in their homes and communities.
Demand for at-home care is expected to continue growing as the U.S. population ages. And, reimbursement for the services remains high in programs like MA, where the government contracts with private insurers to administer the care of Medicare seniors.
In addition, UnitedHealth can curb health benefits spending for its insurer arm UnitedHealthcare by prodding its beneficiaries toward the low-cost settings, while reimbursing its provider subsidiaries for providing that care — essentially paying itself for the service.
