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Since the news surfaced Tuesday that the Department of Justice had opened an antitrust investigation into UnitedHealth Group (NYSE: UNH), additional questions have bubbled up.
Namely, those questions surround the home health provider Amedisys Inc. (Nasdaq: AMED), which agreed to be acquired by UnitedHealth Group’s Optum in June of last year.
Will that deal be affected, either by being drawn out or nixed entirely?
Then, from a more macro perspective, the payvider structure comes into question. Broadly, will payers be less eager to go after health care providers – and home health providers – in general?
The investigation is in its very early stages, so there’s still much to short through. But the investigation itself did not come as much of a surprise to those that have been paying attention.
“I think it’s well known and well documented the scope and breadth that [UnitedHealth Group] has amassed over the last number of years,” Tyler Giesting, a director of health care and life sciences at West Monroe, told me Wednesday. “And then, with the context of the generally antitrust signals that the administration has been sending, … it’s not surprising given the way that the administration has been challenging a number of deals in health care and otherwise.”
Indeed, the Biden administration has taken a hard stance against anti-competitive dealmaking in health care, as well as certain PE-driven dealmaking.
And here you have UnitedHealth Group, which is by some metrics the largest health care company in the country. On top of that, it’s the most prolific acquirer.
The investigation could lead to a lot of change in the health care industry, in home-based care and otherwise.
Sifting through that potential change is the goal of this week’s members-only, exclusive HHCN+ Update.
What comes next
As one of the largest home health and hospice providers in the country, Amedisys’ landing spot matters a great deal to the rest of the industry.
It’s already been over eight months since UnitedHealth Group lured the company away from Option Care Health (NASDAQ: OPCH), which resulted in a $106 million termination fee. But it’s worth keeping in mind that UnitedHealth Group’s first home health deal – for another one of the largest home health providers, LHC Group – was not completed until 11 months after the purchase price was agreed to.
Amedisys will hit that mark in late May, so there’s no reason for alarm bells yet on that front.
On one hand, Amedisys and LHC Group together would result in the largest home health entity in the U.S. On the other hand, because of the nature of the home health industry, Optum would still only own about 10% of the home health market – not a huge number.
For context, UnitedHealth Group already owns about 30% of the Medicare Advantage (MA) market.
But the investigation will undoubtedly complicate things for Amedisys, particularly after a previous DOJ inquiry into the deal. Sen. Elizabeth Warren (D-Mass.) and U.S. Rep. Pramila Jayapal (D-Wash.) also asked antitrust regulators to take a closer look at the deal in October.
I would bet that the Amedisys deal still goes through, but it may take longer than the LHC Group timeline of 11 months. There may be some caveats, too, like Amedisys having to divest certain assets.
“I don’t think you can say that this will have no effect on the deal,” Giesting said. “Because, based on the information that is being publicly reported, Amedisys could be very much interpreted as being involved in some aspects of this probe. And the DOJ was already involved in the Amedisys review. … It’s very possible that it will be impacted by this probe in some way, whether it’s a delay or otherwise. But I don’t think it is going to be viewed in a vacuum.”
Giesting did not want to play a guessing game on whether or not the deal would get done.
He did mention that, if it is finalized, he still expects for it to be completed by the end of 2024.
Other factors to consider
Theoretically, governmental agencies are supposed to stick with relatively consistent guiding principles, no matter who is the president.
But let’s call a spade a spade and recognize that that’s generally not how things work now. And, less than a year from now, there could be an entirely new administration in Washington, D.C.
That’s one thing to consider.
For now, though, another thing to consider is how this affects the rest of the home health industry. If the Amedisys deal doesn’t get done, that would be major news, of course.
But it could also affect other home health care dealmaking, particularly on the larger scale. I wrote earlier this month that I believed UnitedHealth Group would have happily submitted a bid for Enhabit Inc. (NYSE: EHAB) had it not been for all the antitrust noise (and this was before the investigation was launched).
The emergence of payviders has meant more potential landing spots for larger home health providers.
Humana Inc. (NYSE: HUM), for instance, already has CenterWell Home Health, but would like to grow its home health footprint. It’s likely watching the Optum-Amedisys saga closely.
This all could mean a pause from payers on that aggressive payvider strategy.
Or not, as Giesting believes.
“I would not expect other payers [to change course],” he said. “I think you’re going to continue to see payers looking to expand as Medicare Advantage continues to grow, even despite some of the rate headwinds. And also expand in a way that helps manage costs and coordinate care for some of their sicker, higher-cost members and patients within that vertical network.”
And, even while the investigation is a big deal in a sense, Giesting isn’t so sure it’s enough to force UnitedHealth Group to change course on its M&A thesis – at least not yet.
“I don’t think it will have a significant effect in the near-term on their corporate development approach and strategy,” he said. “I think that would be a little too premature.”
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