When it was first announced that the home health giant LHC Group was being acquired in March 2022, it wasn’t shocking.
What was shocking, at least to some, was the buyer – UnitedHealth Group’s (NYSE: UNH) Optum. Though Humana Inc. (NYSE: HUM) had already acquired Kindred at Home, UnitedHealth Group getting into the mix was undoubtedly going to change the home health industry.
Then, just a few months after it closed on LHC Group, the company set out to acquire Amedisys Inc. (Nasdaq: AMED), another one of the largest home health providers in the country. The deal is undergoing regulatory review, but if it is finalized, Optum will own about 10% of the home health market.
For some industries,10% would not be all that large of a share. For a fragmented industry like home health care, it’s massive.
Optum leaders have tried to ease any concerns there may be over their asset takeovers, however.
“To just say it directly, we want to partner with you,” Patrick Conway, the CEO of Care Solutions at Optum, said to home-based care providers at a conference earlier this year. “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?”
Still, home health providers have mixed feelings on Optum’s entrance. Some refuse to comment on the record due to relationships with UnitedHealthcare, the insurer side of the UnitedHealth Group house.
Home Health Care News did recently speak with providers, home health advocates and an M&A firm, however, to get a better idea on how Optum’s land grab is viewed across the industry.
Their responses are below, edited for length, style and clarity.
William A. Dombi, president, National Association for Home Care & Hospice (NAHC)
How do you not think about it? And how do you not have it go through your head – Is it a threat? Is it an opportunity? Is it a disrupter? What are the positives and the negatives?
We have to think about it from an organizational standpoint. But when we think about that, we think about what it means from an industry standpoint.
You’ve got people who are looking at it and saying, “Oh, my God, I better sell my company and leave the business. They’re going to take over and monopolize the world.” And then you see another contingent, too, who see another side of it.
These insurers, these companies – like CVS, Humana and Walgreens, too – aren’t dumb. They’re not looking to just throw money away. They’re looking to see where they can actually have success that matters, whether it’s for shareholders, for their uninsured populations, or their customer base overall.
So we start processing all of that, thinking, “OK. Is this a good thing or a bad thing in the aggregate?” And I think we start seeing some really positive elements to it.
There may be a home care company who would disagree with that, for their own personal circumstances. I can respect that and understand it, but at the same time, how do we take the energy entering into this space and really turn it into something positive for everyone?
Part of it is simply saying to the little guy, “You’ve got loyal employees, who are the greatest asset there is to health care, particularly in the home setting. And this global company is saying this is where we want to stake our territory in health care. Doesn’t that give you some confidence going forward?”
David Kerns, CEO, The LTM Group
It means there’s obviously interest in home care. It really doesn’t change what we do. I think any time that you have competition, it’s a good thing.
I am interested to see how this change affects UnitedHealthcare’s willingness to enter into value-based arrangements and eliminate their outdated authorization processes. We have had very little collaboration with payer innovation with UHC.
Unlike almost all other major health plans we work with, they have not come to the table with any innovative value-based initiatives. Unfortunately, we also struggle more with their authorization process than any other payer. They seem to be stuck in an outdated fee-for-service model, while the other plans have been easier to work with and have enabled better patient outcomes, while providing cost savings as well.
I’m interested to see if the authorization process and contracting initiatives improve as they continue to advance into home care and see the added value home health care creates.
But, ultimately, home care happens at a community level.
Dexter Braff, president, The Braff Group
In terms of M&A, Optum is a unique animal because they’re one of a few really large insurance companies.
If we begin to see some brand-name private equity groups making sizable transactions at any point in the cycle that we’re in right now, that will definitely bring in other PE groups into the fold. We see this all the time when PE targets a marketplace; if one or two PE groups jump into a market that nobody else has jumped into in any significant way, the follow-the-leader activity is extraordinary.
With UnitedHealth Group, though, they’re such a unique strategic buyer that something that they do would not, in my mind, change behavior, because they are just such a unique buyer with very, very unique circumstances.
Jennifer Sheets; board chair, Research Institute for Home Care; board member, NAHC; former CEO, Interim HealthCare
Ultimately, if Optum’s able to accomplish what they want, I think it will be very impactful for access to care and delivery.
The reality is that if they combine these organizations, they will be the largest home- and community-based system in the globe, but certainly in the U.S.
I know there are firewalls and there are protections between [Optum and UnitedHealthcare], as there should be. But if Optum is working with that side to make sure that the rates are rates where providers can actually provide the care, that’s the piece that’s been missing, I believe.
In the past, you’ve got one side of the house saying we need value-based care, which is absolutely right, but the rates don’t follow.
But you’ve got a lot of great minds there. And I think that if they can then influence UnitedHealthcare to help them understand what payment needs to look like in the home, that’d be great.
For now, you have providers saying, “Pay us a better rate, and we’ll save you a ton of money, and we’ll show you the outcomes.” And then you’ve got the payers saying, “We’re giving you this rate until you show us the outcomes, and you take more of our patients.” So we’re just kind of at a stalemate.
I think we’ve definitely got an opportunity there. And Optum can certainly do it, if they pull all the right people to the same table.
Anonymous Home Health CEO
I have a small opinion, but not one I think about often. I don’t really care what other people are doing, to a certain extent. I just have to focus on how my provider organization wins.
But I would say that I think that there has to be some structure around those types of mergers. Obviously there is, but is it enough? Because unchecked growth causes problems across the whole health care continuum. And I think [Optum’s entrance] actually hurts us in terms of advocacy.
While they may look like they’re there to advocate for the home health benefit, they’re also there to advocate – more so – for Medicare Advantage, and around how Medicare Advantage plans can benefit over just one part of the home health benefit.
I don’t think that it is great for us that they’re in this space at the level that they are. I think, in fact, it’s probably just the opposite.