4 Key Questions Surrounding The Amedisys-Option Care Health Merger

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Another one of the largest home health companies is likely to lose its independence soon.

And the potential combination of Option Care Health (Nasdaq: OPCH) and Amedisys (Nasdaq: AMED) – announced in early May – is fascinating, especially if you read and write about home-based health care every day.

It’s time to question, though, what the deal will mean for the rest of the home health care industry.


Enhabit Inc. (NYSE: EHAB) had its quarter-one earnings call yesterday, which highlighted the turbulence tied to handling the current home health payment landscape. Toward the end of the call, A.J. Rice – managing director of equity research at Credit Suisse – asked company leaders a question that will likely be asked frequently to the still-independent home health providers over the next year.

“What’s the thinking about whether you need to have at some point in the future a big, more deep-pocketed partner that you’re aligned with?” Rice asked. “Is there room to go forward and accomplish everything you’re trying to do independently?”

That, and other questions provoked by the Amedisys-Option Care Health deal, are the topic of this week’s exclusive, members-only HHCN+ Update.


– Are independent, public home health companies a relic of the past?

– How many home health companies can survive the adjustment to a Medicare Advantage-dominant payment structure?

– Are hospital-at-home capabilities a necessity moving forward for home health companies?

– How will Option Care Health navigate the home health payment environment once Amedisys’ troubles are its own?

The home health public market

Rice’s inquiry didn’t get much of a response, which is to be expected.

“I think it’s difficult to speculate on various announcements and transactions in the industry,” CFO Crissy Carlisle responded. “We are focused on operating this company and executing on our payer innovation strategy, as well as our recruitment and retention strategy. That’s really all we can say.”

But the question is fair. After all, Enhabit is new to the public market and struggling to find its footing. Meanwhile, its short-lived peers that exited had been successful, legacy providers on the public market.

In less than two years, the three largest providers of traditional home health care have been fully acquired. It’s worth reminding everyone, too, that LHC Group (Nasdaq: LHCG) also combined with peer Almost Family in a $2.4 billion “merger of equals” back in 2018.

Humana (NYSE: HUM) completed its acquisition of Kindred at Home. UnitedHealth Group (NYSE: UNH) closed on its deal to acquire LHC Group in February. Option Care Health believes it will close on its deal for Amedisys in the back half of this year.

Meanwhile, two new faces on the home health public market – Enhabit and Aveanna Healthcare Holdings (Nasdaq: AVAH) – have stumbled since their IPOs. After opening at $25 per share in June 2022, Enhabit’s stock price has been slashed in half. Aveanna opened up at $12 per share in April 2021, and its stock price now hovers just above $1.

It all points back to that question – would “deep-pocketed partners” help?

Certainly, health care is moving to the home. But the payers for those services – namely traditional Medicare and MA – are not willing to pay more just because that’s true.

Adjusting to an MA-dominated landscape

Trying to adjust to the lower rates MA plans often pay for home health services has already cost some leaders their businesses.

Legacy home health providers are not set up for success in a world where over 50% of Medicare beneficiaries are now underneath an MA plan.

“Many organizations are stuck,” Frontpoint Health CEO Brent Korte recently told HHCN. “They’re so large and their processes have worked so well for traditional Medicare. Then you introduce a plan where they’ll make 30% or 40% as much on each patient, it’s probably inconceivable that they would be able to restructure in a way that will allow them to take MA patients. Providers are having to deal with that because they’re having to change mid-flight. Our win is in the way we execute.”

Amedisys recognized this. It’s why it hired Richard Ashworth as CEO, who had immense experience negotiating with MA plans during his time at Tivity Health. It had been striking better deals with plans such as Aetna, but still was suffering from the undertaking that is serving more MA beneficiaries.

Now, it has that deep-pocketed partner. Option Care Health has close to a $5 billion market cap and can help steady the ship.

A caveat and silver lining for smaller companies is that they can theoretically be more nimble operationally than large companies can.

But if the likes of Amedisys and Enhabit are having trouble adapting on the fly, there will undoubtedly be many more casualties in the small- to mid-sized home health market.

Home health rates

Payment rates for home health services are now Option Care Health’s problem, too. Initially, its leaders have shook off the idea that they’re concerned about incoming negative payment rules.

In fact, they’ve expressed some pleasure that they’ll be able to generate more money from those government-payment streams moving forward.

“We know that the reimbursement model will be changing over time and we’ve been thinking about what we need to do to provide broader services with that,” Option Care Health President and CEO John C. Rademacher said Wednesday during the BofA Securities Health Care Conference. “We think that we have built [the reimbursement uncertainty] and an appropriate assessment of those types of changes into the model.”

Plus, negotiating with payers for better rates is not a source of dread, Rademacher and CFO Mark Shapiro said.

“No one’s knocking on our door saying they wanted to give us more money in the infusion space either,” Shapiro said Wednesday. “We fight for every aspect of reimbursement to make certain that we’re fairly paid and we believe that there’s a compelling value proposition here to drive better outcomes for their patients.”

Hospital-at-home capabilities

According to Option Care Health leaders, Contessa Health – Amedisys’ high-acuity care subsidiary – was one of the drivers of the deal.

After working together during Operation Warp Speed early on in the pandemic, Amedisys and Option Care Health expanded their working relationship. Contessa Health was the glue.

More than half of home-based care companies plan to delve further into hospital-level care in the home in 2023. That type of care represents an opportunity for these providers.

The question will be whether it becomes closer to a requirement in the future, from the referral partner and payer partner perspective.

“We’re getting increasingly asked by our hospital partners to consider programs like hospital at home and ER diversion,” Elara Caring CEO Scott Powers told me in February. “It requires a different skill set, but we have the scale in our markets to make it happen.”

After seeing the interest Contessa Health has garnered on behalf of Amedisys, the more at-scale home health providers may feel compelled to have those high-acuity care capabilities themselves.

Yet, on the other end, there are providers that believe there will always be room for a really good home health and hospice business.

“For us, home health and hospice is going to be our bread and butter,” VitalCaring CEO April Anthony told me, referring to her new venture. “We’re still assessing the role that other service lines are going to play in our future relative to expansion.”