$5.4B LHC Group Deal Creates Home-Based Care Health System for Optum

Last week, UnitedHealth Group (NYSE: UNH) revealed that it’s buying aging-in-place giant LHC Group Inc. (Nasdaq: LHCG) and combining the provider with its Optum business. In the aftermath of that announcement, one of the most interesting questions to ponder has been: How will LHC Group fit alongside the rest of Optum’s home-focused offerings?

Optum is a diversified health services company housed within UnitedHealth Group, the parent of UnitedHealthcare, the largest health insurance organization in the U.S., based on revenue. The business emerged in 2011, when UnitedHealth Group consolidated its care delivery, pharmacy benefits and analytics lines into a vertically integrated one-stop shop.

“We are aligning these businesses to better match the way we serve clients and the way our clients access health services,” G. Mike Mikan, Optum’s first CEO, said at the time. “This step will make it simpler for clients to connect with the broad expertise and innovative capabilities across our businesses, so we can help them improve population health, reduce the cost of care and make health care work better for everyone.”

Back then, Optum served a little over 60 million people, had about 30,000 employees and brought in about $25 billion in annual revenue. Now, Optum serves more than 100 million individuals, has roughly 180,000 employees and generates upwards of $155.6 billion in annual revenue.

Much of that growth has come originally, but Optum has also executed multiple big-ticket acquisitions over the past few years while simultaneously building a sizable physician house calls program.

Days before the LHC Group deal was announced, in fact, Optum reportedly acquired up-and-coming outpatient mental health provider Refresh Mental Health from private equity firm Kelso & Co. Shortly after that news broke, another report said it had likewise purchased Kelsey-Seybold Clinic, a multi-specialty group practice based in Houston, Texas.

Meanwhile, Optum last year quietly acquired Landmark Health – the in-home medical group founded by Adam Boehler, former head of the Center for Medicare and Medicaid Innovation (CMMI). And in 2020, it landed naviHealth, a company that provides post-acute care management services.

With Optum’s existing capabilities, LHC Group, Refresh, Landmark and naviHealth would collectively create a first-of-its-kind home-based care health system, I believe. That system, in turn, would accelerate home health care’s move toward value-based care, a point that Optum leadership has already emphasized.

“Now, we’ll be able to take the skills and offering of LHC Group and offer them to Optum Health patients much, much more broadly,” Dr. Wyatt Decker, Optum Health’s current CEO and a practicing emergency physician, explained in a video posted online. “We have over 4 million patients in value-based arrangements, and we’re very excited to be able to offer the services of LHC Group to these individuals.”

I dig into all this and more in this week’s exclusive, members-only HHCN+ Update.

A unique behavioral health connection

Last month, news surfaced saying that Optum had acquired the Jacksonville Beach, Florida-based Refresh Mental Health from Kelso & Co, which itself had reportedly purchased the business from Lindsay Goldberg just a few years ago at a $700 million valuation.

The move reflects UnitedHealth Group and Optum’s desire to bulldoze barriers between physician and behavioral health, a point that Optum Behavioral Care CEO Katherine Hobbs Knutson addressed during a February conference.

“One of the major issues with payment today is that traditionally, the payment is separated [with] physical health on one side [and] behavioral health on the other side through the use of behavioral health carve-out companies,” she said. “That split contributes to a split care delivery system and it leads to lack of coordination and poor access to care.”

Refresh offers a range of mental and behavioral health services across virtual, in-home and brick-and-mortar settings. In the 15 months, the company has expanded to more than 300 locations in 37 states.

On its end, Optum Behavioral Health already claims to be the largest managed behavioral health organization in the U.S., with a network that exceeds 244,000 providers. Adding Refresh to that mix – and positioning these capabilities alongside one of the three largest home health companies in the nation – creates a truly unique behavioral health connection for LHC Group.

Decker directly touched on this idea when Optum announced the LHC Group deal.

“LHC Group’s sophisticated care coordination capabilities and its warm, human touch is so important for home care, and will greatly enhance the reach of Optum’s value-based capabilities along the full continuum of care, including primary care, home and community care, virtual care, behavioral health and ambulatory surgery,” he said.

From a societal perspective, bridging the gap between mental/behavioral health and the types of senior-focused in-home services LHC Group provides has never been more important.

In March 2022 survey of more than 3,800 Medicare customers of health insurance marketplace eHealth Inc. (Nasdaq: EHTH), nearly 40% of respondents said that conditions related to the ongoing COVID-19 pandemic have made them feel more lonely or isolated. Nearly half of the respondents said they were “very willing” to seek mental health care today, compared to 35% two years ago, before the pandemic, and just 29% 10 years ago.

Home health providers had been seeing an increasing number of patients with mental and behavioral health needs prior to 2020, but the events of the past two years have accelerated that trend.

“We get calls all the time from providers in post-acute care, especially home health, to train and help people manage behavioral health, … and I feel it’s due to the fact that individual clients are so isolated,” Katherine Vanderhorst, president of C&V Senior Care Specialists, told Home Health Care News in April 2021. “They haven’t been able to get out to medical providers or see their families. We’ve seen a real increase in agencies, managing depression, anxiety and suicidal patients.”

LHC Group has been seriously looking at ways to reduce isolation among seniors since at least 2018.

Multiple value-based care playmakers

When it comes to value-based care models, physicians are typically seen as the key playmakers. And akin to the Chicago Bulls of the 1990s and the team’s triangle offense, UnitedHealth Group’s Optum has set itself up to have a lot of floor generals to facilitate scoring.

For starters, there is Optum’s HouseCalls program, which gives Medicare members yearly visits with a clinician from home, coordination for further care with a primary care provider, general health screenings and education on chronic conditions management. Optum’s HouseCalls clinicians conducted over 1 million in-home visits in 2020, surpassing that mark in last year’s first half alone.

“Our focus is on leading the way in creating a modern, high-performing health system,” Dr. Philip Painter, UnitedHealthcare’s CMO for Medicare and retirement, told HHCN in August. “An important part of that roadmap is transforming the way care is delivered.”

In addition to Optum’s increasingly popular HouseCalls program, it also has Landmark Health, which it acquired last year at a $3.5 billion valuation, according to Mergermarket. As of the end of 2021, Landmark delivered comprehensive in-home medical care to “the sickest and frailest” patient populations in 18 states.

Since its founding in 2014, Landmark has built its entire business around value-based care and taking risk for the care it delivers. In 2022, it expects to double the number of patients it serves and expand its footprint to 2022 states.

Landmark already works with home health agencies and other providers within its value-based care arrangements. Having an in-house partner like LHC Group could open new doors and streamline how services are brought into the home.

Landmark CEO Chris Johnson and Bruce Greenstein, LHC Group’s chief strategy and innovation officer, actually discussed how the two organizations were already working together at HHCN’s FUTURE 2021 conference. Specifically, Greenstein – a former Landmark adviser who helped recruit Boehler to CMMI – highlighted how the LHC Group joint venture Texas Health Resources was working with Landmark in the Dallas area.

“I think we’re off to a great start,” said Greenstein, formerly the chief technology officer at the U.S. Department of Health and Human Services (HHS). “We’ll look to [Landmark] to get orders signed, to help coordinate. I think it’s going to be a very healthy, accretive, savings-producing relationship.”

Most recently, Optum boosted its physician roster by reportedly buying Kelsey-Seybold Clinic, which has more than 500 physicians in its network, numerous multi-specialty care centers, two ambulatory surgery centers and several other facilities, plus its own Medicare Advantage plan, “KelseyCare Advantage.”

TPG Capital made a minority investment in Kelsey-Seybold in early 2020. At the time, the medical group’s valuation was estimated to be $1.3 billion, according to Buyouts Insider.

Care coordination in the home

LHC Group may also stand to gain from a closer connection to naviHealth, which Optum acquired in May 2020. The deal totaled more than $1 billion, according to the Nashville Business Journal and PE Hub.

Broadly, the Brentwood, Tennessee-based naviHealth helps health plans, hospital systems, risk-bearing physician groups and others by better coordinating care and monitoring their patients’ health status.

“What we do is lead the health systems that are in bundled payments to understand how the bundled payment program works and how to identify the patients that would be appropriate for our services,” navihealth CMO Dr. Jay LaBine explained during an episode of HHCN’s Disrupt podcast. “Also, frankly, to improve the care model for the Medicare patient.”

As the U.S. health care sector continues to evolve, Optum’s existing and expanding care delivery ecosystem will undoubtedly give LHC Group the tools to rapidly move toward more value-based care.