Amedisys Inc. (Nasdaq: AMED) disclosed Monday that UnitedHealth Group’s (NYSE: UNH) Optum submitted an acquisition bid. That makes for a competition between Optum and Amedisys’ current merger partner, Option Care Health (Nasdaq: OPCH).
At this point, it’s unclear whether Optum will ultimately land Amedisys, though early analyst comments suggest Optum’s bid may be more favorable to the home health provider’s shareholders. It is worth exploring, however, the potential result of Optum controlling both Amedisys and LHC Group, the latter acquired in February.
Amedisys and LHC Group under the same roof would produce a home health business unit with unrivaled scale. It’s difficult to gauge each home health provider’s true market share due to different reimbursement streams and patient types, but an Amedisys-LHC Group combo would almost certainly place Optum ahead of CenterWell Home Health, formerly Kindred at Home, as the largest home health provider organization in the U.S.
As is the case with Humana’s (NYSE: HUM) CenterWell brand, owning a vertically integrated care delivery network as a payer is a market differentiator, according to Nathan Ray, a partner at Chicago-based management and technology consulting firm West Monroe.
“[It’s] a way to be competitive and have some of the market success that these health care behemoths have had,” he told Home Health Care News. “The effort to grab Amedisys, shortly after LHC, makes sense in the logic of, ‘Let’s buy everything that we can bring into our portfolio.’”
On top of that, a combined Amedisys-LHC Group would offer other interesting care delivery capabilities beyond home health care.
“Assuming things go through and there’s not broad scale divestitures that are required for the deal to happen,” Tyler Giesting, a director at West Monroe, told HHCN. “They would really be back in a place where they’re managing a much broader sort of post-acute care continuum. … They would be re-adding personal care. Then we know that Amedisys has the Contessa arm, where they’re doing in-home complex acute care, as well as palliative care, which is an area that LHC Group, largely, is not in today.”
Earlier this year, Amedisys agreed to divest its personal care division to HouseWorks.
Comparing the Amedisys, LHC Group footprints
As a company, the Baton Rouge, Louisiana-based Amedisys has a vast footprint, operating in 37 states and the District of Columbia. The company has a presence in most regions, but further density in states like Tennessee, Georgia and South Carolina. Amedisys delivers care services across 511 locations.
On its end, the Lafayette, Louisiana-based LHC Group delivers care in an identical amount of states through 527 locations. Similar to Amedisys, the company has a presence in the South, West Coast and East Coast. Though the companies both operate in the Midwest, there’s still room to grow in the region.
The home health market is significantly fragmented in the U.S., but Amedisys and LHC Group together would likely account for about 10% of that market. Other top home health providers include the aforementioned CenterWell Home Health, Enhabit Inc. (NYSE: EHAB), Bayada Home Health Care, Elara Caring and AccentCare Inc.
While 10% market share is still contextually a relatively small number, Optum owning both LHC Group and Amedisys would likely raise alarms at the Federal Trade Commission (FTC).
“If you’re looking into the crystal ball, based on other recent areas in health care that we’ve seen the FTC take some action, there’s definitely some potential for increased scrutiny,” Giesting said.
In the case of Optum’s LHC Group transaction, the FTC did not challenge the deal. However, it requested more information twice, with one pertaining specifically to home health wages.
Beyond home health services
Aside from offering home health and hospice services, Amedisys is a provider of high-acuity services in the home through its subsidiary, Contessa Health.
Amedisys purchased Contessa Health in 2021 for $250 million. Contessa’s capabilities include hospital-at-home, SNF-at-home and palliative care services.
Since acquiring Contessa Health, it has become a core part of Amedisys’ business due, in part, to its ability to secure hospital partnerships for the company.
“We’re also seeing people that tried to do it on their own, hospitals that tried to do it on their own and fundamentally realized it’s way too complex for them to do on their own, and therefore they’re coming back to us and wanting to form JVs with us,” Amedisys Chairman and former CEO Paul Kusserow previously told HHCN. “I feel really good about what we have at Contessa.”
In March, Kusserow went into more detail about its dealings with hospital partners.
“What do we do for a hospital, we can take away that 15% to 20% of business that they generally don’t make money on,” he said. “We use their ancillary products at full price. We take that out, and then we split the profits with them as our partners. Then payers, they get a cut, because they get that we do that service for less, and then consumers get what they want.”
Contessa has formed relationships with Mount Sinai Health System, CommonSpirit Health and Highmark Health, among others.
Along with home health, hospice and personal care services, LHC Group also runs an ACO management business, Imperium Health.
The company has also engaged with high-acuity care services, to some extent. In 2021, the company formed a strategic partnership with SCP Health.
“I don’t like to use the hospital-at-home label,” Myers said. “We refer to this as ‘advanced care at home,’ because some hospitals really want a SNF-at-home program. Hospitals need more than a one-size-fits-all solution.” former LHC Group CEO Keith Myers previously told HHCN.
Amedisys and LHC Group both have hundreds of joint ventures and partnerships, respectively.
Of note lately, Amedisys partnered with BlueCross BlueShield of Tennessee to provide its members with palliative care services through Contessa Health, and last year the company formed a JV with the University of Arkansas for Medical Sciences.