Optum’s Home Health Land Grab Has Provider Tensions Coming To A Boil

There’s been an anxious buzz in the home health care industry of late.

Big moves are happening. Whether those big moves are good for the industry, though, is yet to be determined. Many in the industry are still grappling with that question themselves.

As I talked to home health providers and insiders this week during the Home Care Innovation + Investment Conference in Chicago, the future of Amedisys Inc. (Nasdaq: AMED) seemed to be at the top of everyone’s minds.

A few people questioned the logic that led to UnitedHealth Group (NYSE: UNH) and Optum submitting a competing bid for Amedisys, and thus challenging Option Care Health’s (Nasdaq: OPCH) own bid.

“Why would they want Amedisys after just acquiring LHC Group?” one executive wondered aloud to me.

The question struck me as a microcosm of the state the larger home health industry is in right now. There’s so much opportunity ahead, but as providers run toward it, the ground underneath them is shifting quickly and constantly.

Medicare Advantage (MA) plans, conveners and other outside investors like Optum are just a few forces causing those shifts.

But some home health providers feel different about each of those parties today than they did even a year or two ago.

That mindset shift, and the challenges that keep provider leaders up at night, are the topic of this week’s exclusive, members-only HHCN+ Update.

Optum’s home health goals

In the last two years, UnitedHealth Group’s Optum has dominated headlines in home-based care. After acquiring one of the largest home health companies in LHC Group, it’s after another in Amedisys.

While Optum is not, UnitedHealth Group is – for all intents and purposes – a payer organization. It owns UnitedHealthcare, an entity many home health providers have had significant difficulties dealing with over the years.

One of the largest companies in the country being heavily invested in home-based care is validating. But many providers are uneasy about Optum’s entrance.

Patrick Conway, the CEO of Care Solutions at Optum, tried to quell those concerns at the conference this week.

“To just say it directly, we want to partner with you,” Conway said to the home health-dominated audience. “I love your feedback. … How do we get this right? How do we have a home health system … that partners with Medicare Advantage plans, both United and others, to really have a value-based system in home health?”

Optum partnering with home health providers is not the same as UnitedHealthcare paying home health providers better rates.

“I don’t control the UnitedHealthcare network of people, but I do encourage them to evaluate these contracts [with home health providers], and to [think about] value-based care contracts,” Conway said.

UnitedHealth Group, as a whole, is focused intensely on moving more toward value-based care and home-based care, with the feeling that the latter will help drive the former.

That’s why a move for Amedisys makes sense. Once a company is in the home health game, they’re in it, warts and all. If a company believes in the value of home health care and is already invested in it, it makes all the sense in the world to get as large of a footprint as it can.

This is especially true for UnitedHealth Group, which needs home health services to drive value on both its payer and provider sides of the house.

“To give you a tangible sense of some of the discussions we’re having,” Conway said. “[They’re around] how do we connect home health and hospital resources to our physicians and nurse practitioners in the home? How do we connect them to the doctors in our clinics to make sure that people get access to that care? How do we work with UnitedHealthcare and other national and regional payers to move to a value-based care system that’s more episodic, that has incentives for quality and value?”

If Optum were to get Amedisys on top of LHC Group, it would be the largest home health provider in the country by far.

Even then, it would need far more home health partners across the country to continue to drive home- and value-focused care across its system.

Waiting on conveners

UnitedHealth Group now calls its own convener – formerly naviHealth – “Care Transitions.” The name change may be the first small step in erasing the stigma that comes with the naviHealth name, a stigma stuck to most conveners from the home health provider perspective.

LHC Group is now a sister company of Care Transitions, one of the largest conveners in the country.

Just last year, LHC Group’s then-CEO, Keith Myers, had choice words for conveners at large.

“I think we’ve done a lot more with managed care [because of our JVs with hospitals], and I have really good relationships with executives,” Myers said last July. “But I think our biggest problem are the conveners in the middle of all of this.”

Now, LHC Group leaders are forced to work with at least one convener intimately. Still, they see conveners, overall, as an ongoing problem for home health providers.

“It is not a great state of affairs today,” Bruce Greenstein, chief strategy and innovation officer at LHC Group, said at the conference. “We’re a big provider first. So, despite the fact that I work with conveners today, we care mostly about our world as a big provider across 39 states.”

Despite being a part of Optum now, Greenstein has effectively taken over the torch that Myers once held at conveners’ feet.

“When a big payer is moving towards using a convener, there are many opportunities for us to just withdraw from the relationship,” Greenstein continued. “It causes so much friction. The classic model is to do nothing with the network and to price arbitrage. And that could start out with an already lackluster payment rate, and then it becomes lower.”

Outside of Care Transitions, the other largest conveners in the country are myNEXUS and CareCentrix. myNEXUS is owned by Elevance Health (NYSE: ELV), while CareCentrix is owned by Walgreens Boots Alliance (Nasdaq: WBA).

LHC Group is not alone in its dismay for the current convener-home health provider relationship. Amedisys’ former CEO, Paul Kusserow, told me in January that if conveners didn’t change their ways, “their day would be coming to an end.”

Kusserow believed that home health providers were gaining leverage in the relationship, something they may not have had before. Greenstein agrees.

“We have – for the first time – substantial leverage if the goal is to manage total cost of care,” Greenstein said. “As we move forward, we do have to think about what the total cost of care at risk looks like. It’s one thing if conveners stay in a narrow line of expenditures and are trying to push down the home health spend on behalf of a payer. The advantage comes when the convener is responsible for all of the post-acute care costs. That’s when we’ll see some recognition.”

Enhabit’s epiphany

Enhabit CEO Barb Jacobsmeyer had one of the most interesting comments of the day Tuesday when she said that MA plans are the ones that often aren’t ready to go at risk with providers.

“We’ve been very open about going in and saying we’re willing to take on risk,” she said. “We’re very proud of our quality outcomes, particularly around things like readmissions, hospitalization rates, [etc.]. What we actually have found is that the majority of [MA plans] aren’t prepared to actually get into a lot of risk-bearing agreements.”

That’s, at least in part, why Enhabit has struggled as it has tried to build a new-age home health system since it went public last July.

But Enhabit leaders have been steadfast in their strategy to gain better more favorable MA contracts, while also deprioritizing plans that pay subpar rates for home health services.

Despite that, as Jacobsmeyer was on stage, AREX Capital Management – which holds about 4.5% of the shares of Enhabit’s common stock – released a statement urging Enhabit to explore a sale.

“Given Enhabit’s objectively challenged execution and share price performance, the board should fully explore the potential delivery of substantial and fair value to shareholders through a sale of the Company,” AREX wrote in a letter sent to Enhabit’s board of directors.