There’s a new home health giant on the block after infusion services provider Option Care Health shelled out $3.6B of stock to acquire in-home care and hospice company Amedisys.
The acquisition creates a massive entity specializing in nearly every type of home care, with over $6B in annual revenue between its 16k+ employees and 46 state footprint.
It’s worth mentioning that the initial analyst reaction to the merger was… not great. The news sent shares of Option Care’s stock sliding over 20% as investors grappled with Amedisys’ reliance on Medicare reimbursement that hasn’t been friendly to home health.
Option Care is one of the largest providers of home and alternate site infusion services, with nearly all of its revenue (88%) stemming from commercial health plans.
Amedisys ranks among the nation’s top independent providers of home health services, offering everything from nursing to hospice. It’s also a major hospital-at-home player thanks to its 2021 acquisition of Contessa Health. A majority of Amedisys’ revenue (76%) comes from Medicare and other government plans.
Combining the two is expected to reduce costs by $50M right out of the gate, due primarily to tech-enabled efficiencies, an optimized geographic footprint, and realigning costs through combined purchasing volumes.
- Revenue is also projected to increase by ~$25M through enhanced care coordination across each company’s respective patient base, as well as new programs. That’s about a 4% increase over the $622M the businesses generated last year.
Although a one-stop home health provider looks good on paper, the mixed response centered around Medicare’s recent reimbursement cuts for in-home therapies, with more cuts likely on the horizon in next month’s proposed rule for 2024.
- That’s on top of the ongoing shift to Medicare Advantage and its meaningfully lower rates, not to mention the acquisition arrives just two months into Richard Ashworth’s tenure as Amedisys CEO.
Regardless of the timing, combining Amedisys’ home health and hospice solutions with Option Care’s alternate site infusion services creates a juggernaut in-home provider at a time when healthcare continues to move away from the hospital. The combined business undoubtedly has a more diversified payor mix than either one independently, and the leadership team believes the synergies and joint negotiating power will more than offset any reimbursement headwinds. Time will tell.