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The flurry of 2021’s home-based care deals was a tough act for 2022 to follow.
Especially in the third and fourth quarters of last year, a record-breaking number of transactions went down. A variety of factors contributed to that volume, including changing conditions that – at least for a short period of time – allowed deals delayed by COVID-19 to move forward later in the year.
But even though 2022 was set up to fail from an M&A lover’s perspective, it did not. Though the sheer volume of deals may have tapered off, the total dollar amount on announced deals skyrocketed.
As you are probably aware, UnitedHealth Group’s (NYSE: UNH) deal for LHC Group Inc. (Nasdaq: LHCG) and CVS Health’s (NYSE: CVS) deal for Signify Health (NYSE: SGFY) were largely responsible for that.
Both of those deals are noteworthy for more reasons than the dollar amounts, however. They paint a larger picture of where the home-based care world is headed. And beyond those, we must consider an array of other very important, intriguing deals as the calendar turns.
For this week’s members-only, exclusive HHCN+ Update, I explore the transactions from 2022 that are meaningful for the future.
UnitedHealth Group, Optum strike deal for LHC Group
Though LHC Group will not have the fortune of actually being integrated into the Optum network until the first quarter of 2023, it will always be known as the home health acquisition that defined 2022.
In late March, the companies announced that a deal had been agreed upon. One of the nation’s largest health care companies – and companies, period – was paying nearly $6 billion for one of home health care’s biggest providers.
The deal matters for a variety of reasons. For one, it proves that the largest and arguably most innovative companies are continuing to invest in home- and community-based capabilities.
“It’s not just about the clinics; it’s now about the home and the community,” UnitedHealth Group CEO Andrew Witty said last month at the company’s investor conference.
In addition, it sets the stage for a pairing of two entities from fields that have been at odds with each other in the years leading up to 2022: Medicare Advantage (MA) plans and home health companies.
Though MA is just one part of what UnitedHealth Group does, other home health entities are waiting to see whether the combination will lead to better contracts and better relationships for just LHC Group, or for the industry at large.
In fact, it was Bruce Greenstein – chief strategy and innovation officer for LHC Group – who made provocative comments about the MA plans’ sub-par rates for home health services just a month prior to the deal’s announcement.
“We’re losing. This is a really serious moment in time for all of us,” Greenstein said. “We’ve been glossing over this as an industry for far too long. … We are getting our clocks cleaned. And we just tend not to talk about it.”
Optum and LHC Group will now be operating underneath the same UnitedHealth Group umbrella, likely before the end of the first quarter of 2023.
UnitedHealth Group plans for how it will hit the ground running with its new suite of capabilities post-closing will impact the home health industry for years to come.
CVS Health’s $8 billion bet on Signify Health
CVS Health’s leaders had been teasing a further penetration into the home health space for months before they put their money where their mouth was, announcing an $8 billion deal for Signify Health.
Signify, a value- and home-focused technology network, had entered the public market less than two years earlier. Even before CVS Health’s Signify deal was made official, Amazon (Nasdaq: AMZN) had reportedly thrown its hat in the ring for the in-home care enabler.
Taking a step back, Amazon’s $250 million deal for Caravan Health – its first acquisition as a public company – may have laid the groundwork for the eventual CVS Health-Signify transaction.
“It doesn’t happen very often in this complex world of interests and companies, et cetera, that you find [an organization] that has such a great complementarity to what you do — virtually no overlap and then the ability to get going and work together from the close of the transaction in a really powerful way,” Francois de Brantes, then-senior vice president of Signify, told Home Health Care News.
Later on, Caravan Health’s ability to bolster Signify’s ability to be a true value-based care driver was something CVS Health touted.
“This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience,” CVS Health President and CEO Karen Lynch said. “In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-[payer] approach.”
Most importantly, the deal cemented the idea that some of the largest retailers in the country – CVS Health, Walgreens Boots Alliance (Nasdaq: WBA), Amazon and Walmart (NYSE: WMT) – were full-steam ahead when it came to building out home-based care capabilities.
Amazon’s move to acquire One Medical (Nasdaq: ONEM) for $3.9 billion wasn’t directly related to home-based care, but does follow the above trend of retailers taking on more care capabilities. I have the sense they will be featured in future year-end deal round-ups, but for a more direct reason.
Walgreens fully acquires CareCentrix
In the same vein, Walgreens Boots Alliance turning its investment in CareCentrix – a home health care convener – into a full acquisition is also of note.
When I talked to CareCentrix CEO John Driscoll in September, he told me that he felt that CVS Health’s acquisition of an in-home care enabler like Signify Health was close to a direct response to Walgreens’ backing of CareCentrix. Driscoll is now the EVP and president of U.S. Healthcare at Walgreens.
“What’s exciting about the retail pharmacies investing in the last mile is that you have these massive new entrants – with a much closer relationship with consumers and patients – investing in expanding expanding care in the community,” Driscoll told me. “CVS’ purchase of Signify is just an endorsement of CareCentrix and many others have been saying for many years – that the opportunity is huge, to deliver better outcomes, at lower cost by keeping people out of the hospitals and nursing homes who don’t need to be there. I just think it’s thrilling.”
In October on 2021, Walgreens invested $330 million in CareCentrix, then acquired the remaining stake for $392 million a year later.
As part of that deal being finalized, Driscoll moved from CEO of CareCentrix to his current role with the U.S. Healthcare segment at Walgreens.
“The new entrants, like Walgreens and CVS, are going to be much more aggressive about taking risk and expanding these new products and services,” Driscoll told me.
Undoubtedly, some of the largest companies in the country having their hands directly on home-based care could do wonders for the industry – legislatively, technologically and otherwise.
But not every home health or home care provider is sure of that yet. The next year will likely be the first in which we can truly tell what the impact of these retailer moves will be for the larger health care system and for home-based care providers themselves.
Humana Inc. (NYSE: HUM) announced in August that it had officially completed its divestiture of Kindred at Home’s hospice and personal care divisions.
After Humana fully acquired Kindred at Home in 2021 – now branded as CenterWell Home Health – the company decided to divest, in part, the majority of its personal care and hospice assets.
Clayton, Dubilier & Rice (CD&R) acquired 60% of those assets.
“While palliative and hospice services are important components in the continuum of care that Humana offers patients, we are confident that we can deliver desired patient outcomes and improved customer experiences through partnership models rather than fully owning Kindred at Home Hospice,” Humana CFO Susan Diamond said.
The deal allowed Humana to benefit in a monetary sense, $2.8 billion for 60%, while also holding onto that remaining stake in the business.
When the deal was finalized, it was announced that the new, standalone company would become ‘Gentiva.’ Gentiva Health Services, of course, was the home-based care company that was acquired by Kindred Healthcare in 2015, and later a part of Kindred at Home.
David Causby – a leader at the original Gentiva and the former president and CEO of Kindred at Home – will be taking the helm of the new standalone company.
On the surface, it looks like a home-based care company that was built up – all the way to the point where it was the largest home health entity in the country – and then broken down again.
But the reasons why it’s being broken down again, and who is taking away the individual pieces, is why this transaction is so intriguing.
Diamond expressed her reasoning – that Humana wanted CenterWell Home Health to come to fruition the most, and that personal care wouldn’t necessarily need to be an in-house feature. That was further evidenced by the fact that it announced the forthcoming closure of the majority of its SeniorBridge Home Care locations in late November.
On CDR’s end, it’s taking an approach that seems more popular among private equity players these days, and that’s building out the full care continuum under its umbrella. Outside of personal care and hospice with Gentiva, the company has also invested in home-based care conveners, physician groups and pharmacy companies.
Help at Home enters New York
When Help at Home – the primarily Medicaid-based personal care provider – entered into New York this year through its acquisitions of Edison Home Health Care and Preferred Home Care, it immediately added over 10,000 clients and 12,000 employees to its network.
Financial terms of the deals were not disclosed, but given the numbers, it’s safe to say this was one of the biggest personal home care transactions of the year, if not the biggest.
“We love the fact that they’re in the state of New York and the geographic diversity that these two acquisitions will bring to Help at Home,” Tim O’Rourke, the president of Help at Home, told me at the time. “New York is the largest home- and community-based services state in the country. We love a state that has that density and providers that have that density, much like we have throughout the rest of Help at Home.”
The Chicago-based provider has long been considered a candidate to eventually go public. It is currently backed by the private equity firm The Vistria Group.
Immediately upon entering New York, the state became one of the largest in Help at Home’s footprint in terms of density. Overall, Help at Home has more than 190 locations across 12 states. It provides home- and community-based services to 66,000 people monthly via its near-50,000 caregivers. New York, Illinois and Indiana are now the company’s most dense markets.
“We think this is a great platform to have now in the state of New York,” O’Rourke said. “And I think it’ll create growth opportunities as we go forward. So we think there’s a lot of room to continue to grow, even though we’ve now got one of the largest combined home care providers in the state.”
Enhabit spins off of Encompass Health
The public market gives and takes away.
While LHC Group’s eventual integration into UnitedHealth Group may mean one less pure-bred home health company on the public market, Encompass Health’s (NYSE: EHC) spinoff of Enhabit Inc. (NYSE: EHAB) gave us another.
After considering strategic alternatives for its successful home health and hospice segment for months, Encompass eventually decided to give Enhabit its name and let it test the waters on its own on the New York Stock Exchange in July.
Although the company got off to a rocky start on the public market, Enhabit is now seemingly finding its footing. Led by CEO Barb Jacobsmeyer, the company is reporting better hiring trends and advantageous, case-rate contracts with managed care companies.
“We do have, obviously, the scale to be able to be at the table and we are at the table with all the national payers,” Enhabit CEO Barb Jacobsmeyer said earlier this month at the BofA Securities Home Care Conference. “While I feel they understand the value proposition for home health, it is sometimes difficult for them to get past the unit cost of home health.”