Optum Competes for Acquisition of Amedisys

We’ve got a good ol’ fashioned home care standoff, with UnitedHealth Group’s Optum division throwing a wrench in Option Care Health’s takeover of Amedisys by submitting a competing offer of $100 per share, 100% cash.

Optum’s offer values Amedisys at about $3.2B, whereas Option Care’s already-accepted all-stock offer valued the home health and hospice provider at $3.6B barely over a month ago.

  • Amedisys shareholders now have the option to back out of the Option Care acquisition, which is probably tempting since the all-stock transaction would give them less liquidity, expose them to a ton of downside risk, and was met with pretty tough analyst reactions.
  • The Optum announcement prompted Option Care to reiterate its confidence in the acquisition, which it says could reduce costs by over $50M right out of the gate and lead to $9B in combined revenue by 2027 (vs. $6B today).

Besides showing that it can steamroll any would-be competitors’ moves, Optum is picking up home care providers left and right as a way to expand its margins by keeping patients in their homes and out of higher-cost healthcare facilities.

  • Amedisys operates close to 350 home health agencies, 160 hospice care centers, and is a major hospital-at-home figure thanks to its 2021 acquisition of Contessa Health.  

Here’s a look at the top five US home health providers and their current market share:

  • Kindred – 6.0%
  • Amedisys – 5.0%
  • LHC Group – 4.4%
  • Encompass – 3.9%
  • AccentCare – 1.7%

Kindred has already been scooped up by Humana. Amedisys is moments away from an acquisition. LHC group was recently acquired by Optum. It’s anyone’s guess who the next targets are, but there’s a pretty clear trend among the top players.

The Takeaway

Although Amedisys is still bound to its agreement with Option Care, Optum’s approach likely qualifies as a “superior proposal” that would let shareholders dissolve any existing obligations. The market currently looks like it’s picking Optum as its favorite to get the acquisition, with shares of Amedisys jumping over 10% on the new offer, and shares of Option Care also rallying since its investors weren’t too enthused about the acquisition in the first place.

Option Care Health Acquires Amedisys for $3.6B

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.

The Takeaway

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.

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