On late Friday, Amedisys Inc. (Nasdaq: AMED) announced that it had agreed to divest certain locations to VitalCaring, in a deal that would be a massive one for the home health industry. It could clear the way for UnitedHealth Group (NYSE: UNH) to finalize its takeover of Amedisys, and also turn VitalCaring into one of the largest providers in the country overnight.
The deal will only come to fruition if the UnitedHealth Group-Amedisys deal goes through. But there is speculation that UnitedHealth Group and Amedisys worked with the Department of Justice (DOJ) on the divestment locations.
“While it’s still difficult to predict how the DOJ acts on the pending AMED sale, the divestiture agreement helps increase the likelihood of the AMED deal closing,” an analyst note from Jefferies read. “While we recognize that scrutiny of UNH’s deals is high and that the DOJ could still move to sue to block its acquisition of AMED, our belief is that the composition of the portfolio of assets that AMED/UNH are selling to VitalCaring was determined through multiple conversations with the DOJ over the last few months. For this reason, we believe that the divestiture agreement announced on Friday, technically, addresses anti-trust concerns, which should meaningfully increase the likelihood of the AMED deal closing in the next few months.”
UnitedHealth Group acquired LHC Group – one of the largest home health providers in the country – last February for $5.4 billion. A few months later, it agreed to acquire Amedisys for $3.3 billion.
Combining LHC Group and Amedisys’ footprints under Optum – UnitedHealth Group’s provider arm – raised concerns from antitrust regulators. That led to the divestment package that is now materializing.
A location count related to the divestment has not yet been disclosed, but initial reports suggested that Amedisys was prepared to offload over 100 locations to the buyer.
If VitalCaring were to gain 100 or more locations from Amedisys, that would turn it into one of the largest home health providers in the country. Currently, the company has about 65 locations, mostly in the Southeastern U.S.
The Amedisys deal would more than double VitalCaring’s current footprint, also expanding it further across the U.S.
With 150+ locations, VitalCaring will supersede the location total of some of the larger, private home health providers. The deal would put it in the ballpark of others like Compassus, Elara Caring and AccentCare.
Backed by The Vistria Group and Nautic Partners, VitalCaring is led by April Anthony, the former CEO of Encompass Home Health & Hospice. Encompass Home Health & Hospice eventually spun off of Encompass Health (NYSE: EHC), becoming its own public entity – Enhabit Inc. (NYSE: EHAB). Anthony left the company before its spinoff.
When the Dallas-based VitalCaring first launched a couple of years ago, it was a smaller, regional provider. Anthony told Home Health Care News that, after establishing a culture, the goal was to gain more scale.
She also mentioned a void she saw in the home health market, one that she felt she and VitalCaring could step into reasonably soon.
“If you think about five years ago, you had all these founder-owned, founder-ran businesses,” Anthony said last September. “The people who were around the table leading home health businesses were lifers. They were people who were passionate about home health care. Now, that’s not necessarily [the case]. There’s this void in the market that I’m super excited about stepping into. We have the opportunity to bring the heart back to home health care.”
Anthony, if the deal closes, will again be at the helm of one of the largest home health companies in the country. It will also help with operational struggles like negotiating with Medicare Advantage (MA) plans.
The deal is expected to close at some point before year end.
Luke James – the president of VitalCaring, and also an Encompass veteran – said at Home Health Care News’ Capital + Strategy conference that he thought now was actually a good time to grow as a home health company.
“If you have a long-term vision, and your sponsors aren’t looking to exit tomorrow, then you’ve got the patience to be able to buy when it’s tough and be really well positioned when they’re looking to exit,” James said.
A VitalCaring spokesperson told HHCN that the company could not provide specific details on a pending transaction, but did offer that “this represents our ongoing commitment to grow VitalCaring in pursuit of our mission to transform lives and foster hope through genuine caring to patients nationwide.”
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