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.

The Future of Home and Community Care

A bit of a slow news week gave us a chance to circle back on a recent NEJM commentary by Optum’s leadership, which laid out the key components of a futuristic home care model and the steps that Optum is taking to make it a reality.

The vision is to unite modular point solutions around the patient to enable timely interventions and care coordination that is supported by data and technology for a seamless experience and optimized care delivery across providers and care settings.”

Sounds great, maybe a little boilerplate-ish, but the individual solutions tie it all together:

  • Patient Assessments – The “pivotal first step” to identifying, engaging, and stratifying patient populations through annual in-home comprehensive clinical examinations of medical, behavioral, and social needs. Ex. Optum HouseCalls
  • Care Transitions – Appropriately managing a patient’s transition from acute care facilities is essential to keeping recoveries on track, and comprehensive programs should include post-discharge engagement and 90-day follow-ups. Ex. naviHealth
  • At-Home Emergent Care – At-home emergent care is convenient for patients while helping avoid readmissions, and the authors cite a 2018 hospital-at-home study demonstrating better outcomes than inpatient care. Ex. DispatchHealth   
  • Home-Based Medical Groups – The cherry on top of the proposed model is a call for more home-based medical groups to treat patients with chronic conditions. Services might include primary care, therapy, and dialysis. Ex. Landmark Health

The Takeaway

Although the article was mainly intended to provide a framework for successful home care, it also gave us a great peek at Optum’s priorities. It was interesting to see the companies that the authors held up as prime examples for each solution, and it’s easy to picture each of them as potential acquisition targets considering how active Optum’s been in the M&A space.

Optum: Patient Expectations vs Reality

It’s difficult to quantify exactly what a perfect healthcare consumer experience looks like. That’s why most coverage of rising patient expectations involves pointing out differences between broken care experiences and Amazon Prime, and why it’s worth taking a closer look when a company like Optum puts out an in-depth report on the topic.

Optum surveyed over 1,000 consumers to explore how payors and providers can adapt their digital on-ramps to healthcare (online portals, websites, mobile apps) to optimize for patient satisfaction.

Highlights from the report centered around the expectation vs. reality gaps for these digital front doors, with the largest rifts found between: finding information about providers (i.e. ethnicity, gender, and licenses), ability to schedule an appointment online, and booking telehealth visits.

  • Scheduling disconnects were most acute for consumers ages 25 to 34, with 45% preferring online scheduling, but only 28% doing so today.
  • The cross-generational divide for engagement preferences has shrunk, with 44% of 55-64 year olds preferring text messages for post-appointment provider communication – just a few percentage points behind phone calls (47%) and email (49%). 
  • 52% of respondents missed a scheduled appointment in the past year, suggesting that there’s plenty of room for payors and providers to improve engagement. The most cited reason for missing an appointment was that they simply forgot (33%).

The Takeaway
The consumerization of care has been one of the biggest themes of digital health for years, and the past few weeks were no exception. Although the core idea is no longer a surprise, Optum did a great job wrapping numbers around areas where healthcare experiences are falling short, and drove home the point that removing friction for those seeking care is one of the best ways to attract and retain new patients.

Optum’s Digital Health Acquisition Spree

To some investors, this year’s brutal pullback in health company valuations might be hurting their appetite for risk. Others, like UnitedHealth Group’s Optum unit, seem to be treating the lower multiples like it’s Black Friday at the M&A store.

Last week, Optum added home healthcare provider LHC Group and behavioral health clinic operator Refresh Mental Health to its already expansive portfolio of doctor groups, surgery centers, and remote care services.

LHC Group is one of the nation’s largest home health and hospice companies, providing over 12M in-home interventions to 500k patients annually. 

  • The acquisition values LHC Group at $5.4B and will see the company’s staff of 30k front-line care providers and support personnel join Optum after an expected close in the second half of the year.
  • Bolstering home health services aims to support UnitedHealth’s payor division, UnitedHealthcare, in expanding the role of home services as an efficient alternative to nursing homes and a way to reduce unnecessary hospitalizations.

Refresh Mental Health operates a network of over 300 outpatient mental health, substance abuse, and eating disorder clinics across 37 states.

  • Although the terms of the acquisition were net disclosed, Refresh was previously acquired by a private equity firm for $700M in 2020, and was reportedly generating $40M in revenue at the time.
  • Refresh gives Optum a large access point to the growing behavioral health sector, which has proven to see sustained patient demand and telehealth uptake as the pandemic draws on.

The Takeaway

One of the reasons why UniteHealth Group has grown into an industry juggernaut is because it’s successfully been able to create value through synergies between its payor and health services divisions (almost too much success according to the DOJ’s case against its Change Healthcare acquisition). Adding new at-home and behavioral health services through M&A makes perfect sense for companies that can turn a combined service portfolio into more than a sum of its parts, and that’s exactly what UnitedHealth Group is banking on with the addition of LHC and Refresh.

HLTH: UnitedHealthcare Launches Virtual-First Health Plan

UnitedHealthcare made headlines at HLTH by announcing the launch of NavigateNOW, a virtual-first health plan that offers an integrated approach to providing care both virtually and in-person.

  • NavigateNOW is a collaborative effort between UnitedHealth’s payor arm and its Optum subsidiary that seeks to capitalize on the industry-wide shift towards hybrid care. The virtual-first health plan is designed to provide patients with a personalized virtual care team for medical and behavioral health services with a seamless hand-off to in-person treatment if needed.
  • Availability begins later this year in nine initial markets, with a goal of expanding to large employers and over 25 markets by the end of 2022. NavigateNOW offers members no copays for common services, unlimited 24/7 physician access, and reduces plan premiums by approximately 15%. 
  • The collaboration leverages Optum’s primary care and behavioral healthcare services, with UnitedHealthcare’s national provider network available for in-person visits. The integrated care model is designed to identify health issues earlier, encourage preventive care, and deliver services in the most appropriate setting.

The Takeaway

It’s a strategic priority for UnitedHealth to take advantage of the overlap between Optum and UnitedHealthcare, and NavigateNOW is the first major launch in that initiative. NavigateNOW is UnitedHealth’s first virtual-first primary care plan, and combining Optum’s digital resources with a large clinical footprint gives the service strong value proposition within the digital health market.

Optum Enters the Direct-to-Consumer Arena

Optum, a subsidiary of UnitedHealth, recently began selling prescription medications online directly to patients. The company also began offering telehealth services to provide prescriptions to treat depression, erectile dysfunction, and other common illnesses – directly challenging startups such as Ro and Hims that offer online access to drugs for many of the same ailments.

UnitedHealth is the most profitable US healthcare company, with net income totaling $15.8b in 2020, and Optum is its fastest growing business segment. The company has expanded far beyond its payer roots and now employs or contracts over 50k physicians.

Optum launched its online storefront in November 2020 before adding pharmacy and healthcare services in June. It’s recent redesign and cash payment options make it more friendly to digitally native consumers.

  • The Strategy – More Americans are paying directly for healthcare, and by offering cash services to either uninsured or budget-constrained patients, Optum is increasing access to healthcare.
  • The Real Strategy – Optum’s entrance into the direct-to-consumer world defends against rising competition from retail giants such as Amazon and Walmart, both of which have launched digital pharmacy options as membership incentives.

The Takeaway

UnitedHealth’s largest competitive advantage is its vertical integration. It operates the largest US commercial insurance provider, a substantial pharmacy benefits manager, and is one of the biggest employers of physicians in the country. It’s recent expansion deepens this integration, while keeping patient money in-house amid a sea of new competition.

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