Analysts expect the Federal Trade Commission to investigate The proposed $3.3 billion deal between UnitedHealth Group’s Optum and home health company Amedisys.
on Monday, amedisis announced that it has accepted an all-cash offer of $101 per share UnitedHealth Group’s optum and pulled the plug on a Proposed $3.6 billion all-stock deal alternative care health, The announcement comes four months after Minnesota-based UnitedHealth Group Minnetonka Its $5.4 billion acquisition closes Domestic health company LHC Group. That deal was delayed for several months because of the FTC’s request for additional information.
Optum said in a news release that it is confident that regulators will approve its deal with Amedisys. The FTC did not respond to requests for comment.
Stay alert—subscribe to the daily finance newsletter.
Amedisys and LHC Group are the second and third largest home health agencies in the country by revenue, respectively. Although analysts estimate the combined companies make up only 10% of the highly fragmented home healthcare market, they say this week’s proposed transaction is likely to raise concerns from the FTC.
“When you go into certain geographic markets, there is overlap between [LHC Group] and Amedisys,” said Scott Fiddle, managing director of financial services company Stephens Inc., ”we think from a bottom-up perspective, there will probably be markets where divestment will need to be pursued. [for regulatory approval],
Fidel said the combination could prompt the FTC to look more closely at future deals that involve the vertical integration of health insurance and care delivery.
It’s a trend unitedhealth group, Humana And CVS Health are capitalizing on the growing popularity of Medicare Advantage plans among baby boomers in recent years.
UnitedHealth Group is the nation’s largest health insurer and the largest Medicare Advantage organization by enrollment through its UnitedHealthcare business. the company has also acquired physician practices through its Optum business, a data analytics business, a prescription drug unit and home health care units.
Humana is the nation’s fourth largest health insurer and the second largest Medicare Advantage organization by enrollment. earned home health Provider Kindred at Home rebranded it in 2021 under its Centerwell unit, which also owns primary care and pharmacy services.
CVS Health owns Aetna, the nation’s sixth-largest health insurer by enrollments and the fourth-largest Medicare Advantage organization. The retail giant also owns pharmacy benefits manager CVS Caremark, home health technology and analytics platform Signify Health and primary care provider Oak Street Health.
The scale of vertically integrated corporations in some markets could invite inquiries from the FTC about other companies’ ability to price services and attract workers, said Steven Parente, a finance professor at the University of Minnesota’s Carlson School of Management.
“Many of these services are really niche and in some areas they can actually beat the competition,” Parente said.
Never miss important news again. Sign up for Modern Health Care alerts.
A March report from the Brookings Institution, a think tank, raised additional concerns that vertical integration could increase Medicare Advantage plan spending on goods and services belonging to businesses owned by health insurers.
The Affordable Care Act requires Medicare Advantage plans to spend at least 85% of premium revenue on health spending, as opposed to administrative costs or profits. However, if a plan is spending money on services that are owned by the parent company, those expenses can be considered a profit, the Brookings Institution said.
Still, some analysts believe the additional scrutiny of health care deals by the FTC could make it harder for the Centers for Medicare and Medicaid Services to expand value-based care, which links reimbursement to the quality of services. CMS has set a goal to move 100% of Medicare beneficiaries to a value-based care system by 2030.
“That level of integration between physicians, home health and every other part of the healthcare delivery system is what makes value-based care cost effective,” said Brian Tanquilut, healthcare equity analyst at Jefferies. “What CMS is basically saying is that we want vertical integration in some way or another.”