Today, UnitedHealth Group (NYSE: UNH) and Amedisys tied a bow on their merger. The deal – after being beleaguered by the DOJ’s attempt at blocking it – will serve as a watershed moment for the home health industry, which is becoming increasingly consolidated and dominated by the nation’s largest health care companies.
In addition to creating a new titan of the industry and hastening the growing trend of consolidation in the space, the deal is a loud and clear signal of what the industry can expect related to dealmaking under the rest of President Donald Trump’s tenure in the White House.
Meanwhile, the deal changes the on-the-ground operating landscape for home health providers in overlapping areas with UnitedHealth and its new subsidiary, Amedisys. It creates opportunities for providers in areas where the companies’ planned divestitures are located, largely in the Southeast, but spells added pressure for small and nonprofit organizations.
In this week’s exclusive, members-only HHCN+ Update, I’ll share the deal’s wide-reaching implications and offer analysis and key takeaways, including:
– What growing concerns mean for industry consolidation
– What the deal means for other home health providers
– What the DOJ’s decision tells us about the Trump administration’s approach to dealmaking
Consolidation concerns
UnitedHealth and Amedisys cheered the DOJ’s recent decision to clear a path for the merger to close, but some organizations shared less rosy reactions, all centered around concerns of a home health monopoly.
A group of lawmakers issued a statement on Friday opposing the DOJ’s settlement, saying that the divestiture of 164 facilities would not stop UnitedHealth’s market dominance and could increase costs, reduce access to care and limit employment options for nurses.
U.S. Reps. Pramila Jayapal (D-Wash.), Chris Deluzio (D-Pa.), Pat Ryan (D-N.Y.) and Angie Craig (D-Minn.) said in the statement that the merger would “supercharge health care dysfunction.”
“When a company as powerful as UnitedHealth is allowed to continue buying up smaller healthcare corporations, it leads to a broken system where prices are high, competition is stifled, and patients and healthcare workers are the ones who pay the price,” the statement read. “This settlement is a failure by the DOJ to do their job and protect Americans from the dangers of a monopolized healthcare system. It’s a clear signal that the system is rigged in favor of wealthy corporations, not the patients and workers who deserve affordable, quality care.”
The American Economic Liberties Project, a nonprofit, non-partisan, anti-monopoly advocacy organization, also pushed back against the deal.
“The DOJ was right to challenge this deal, which would eliminate head-to-head competition that lowers costs, improves care quality, and betters working conditions for nurses and other caregivers,” Emma Freer, senior policy analyst for health care at the American Economic Liberties Project, said in a statement. “This settlement abandons that goal and caves to UnitedHealth Group, one of the most dangerous monopolists in American health care. It claims to divest home health and hospice care providers in overlapping markets but, in actuality, cedes them to similarly conflicted buyers, including a highly-leveraged private-equity firm.”
The organization said that the DOJ’s $1.1 million fine of Amedisys for false certification amounts to a “0.04% surcharge.”
The same day that the proposed settlement was announced, U.S. Senators Elizabeth Warren and Ron Wyden launched an investigation into UnitedHealth’s alleged practice of incentive programs that encourage nursing homes to cut health care costs.
Warren also took to social media to decry the proposed settlement.
“This is another half-baked merger settlement by the Trump DOJ – this time at the expense of the most vulnerable,” Warren said in a Facebook post. “The public deserves to know if this deal is based on political favors.”
I do not expect the closure of the deal to put an end to protests, but now that the merger has been finalized, outcry is likely to focus on encouraging the federal government to limit further such deals. And as I explore below, such a change is unlikely to occur.
Implications for the home-based care industry
I spoke with experts last week about the implications of this deal on the home-based care industry and was told that it presents both opportunities and challenges for other home health players. My take is that, while the tailwinds created by the deal could help medium to large providers, I anticipate smaller and nonprofit organizations to face far more challenges and reap scant rewards.
Mid-size, middle-market home health providers with existing exposure in the Southeast are likely to acquire divested UnitedHealth and Amedisys branches, according to Joe Widmar, director at West Monroe, a Chicago-based business and technology consulting firm. These organizations have some leverage with UnitedHealth and Amedisys, and therefore may benefit from discounted growth opportunities. Though this leverage could be tempered, Widmar said, since he expects a “pretty hefty” number of interested buyers.
These deals are likely to result in stronger regional platforms, as the mid-size players grow larger due to large players getting super-sized.
Larger regional players may, in turn, put more pressure on small providers through competition for patients, referral partners and clinical employees.
Some of the divestments are already underway with buyers in place. The growth of PE-backed companies like the Pennant Group (Nasdaq: PNTG) and BrightSpring Health Services (Nasdaq: BTSG) through their absorption of divested UnitedHealth and Amedisys locations will also exacerbate issues felt by nonprofit home health organizations.
Nonprofit home health organizations have suffered from private equity’s involvement in home health, per conversations I’ve had with Andwell Health Partners’ CEO Ken Albert. (Check out our podcast episode for his thoughts on how PE is affecting nonprofit home health providers.) With providers like Pennant and BrightSpring growing only stronger, these pains are likely to intensify.
And yet, the overall home health industry is likely to feel renewed enthusiasm from investors, as UnitedHealth’s dedication to pursuing and closing the Amedisys deal proves the home health thesis: This is an industry where people want to be, the demand for services is high, and while reimbursement struggles abound, the services are overall cost-saving for payers and increasingly desired by patients.
However, this boon is again likely to most benefit providers looking to sell or gather more investor dollars, again leaving smaller independent organizations to feel primarily negative impacts from the UnitedHealth and Amedisys merger.
The merger’s policy implications
Regardless of opinion on the merger, the settlement allows interested parties to glean new insights into the Trump administration’s approach to dealmaking and antitrust concerns.
While the DOJ did require UnitedHealth and Amedisys to divest facilities worth $528 million in annual revenue, the settlement is a win for the companies – and for other companies interested in completing transactions under the current administration.
“It may signal a willingness to forgo more standard operating procedure in favor of compromise,” Widmar previously told HHCN. “It’s probably a signal that the administration, or this Justice Department, may be willing to pursue mutually beneficial outcomes more rapidly than others.”
The likely worsening state of reimbursement may only make for an even more friendly regulatory environment for large-scale health care deals.
“If HHS, CMS is pushing down savings, cutting reimbursement, creating all those kinds of pressure on the industry, I think from a holistic perspective, the current administration will be more willing for some of these deals to go through,” Tao Qiu, equity research analyst at financial services group Macquarie Group, told me. “Because it’s just a natural process of consolidation through tough times.”
In any case, the writing on the wall is becoming clearer and bolder by the day. Namely, the future of home health lies in a more consolidated industry that must be able to succeed in value-based models and either negotiate successfully with health plans or, as is the case now with Amedisys, tie up with health plan providers. This puts pressure on nonprofit organizations to get creative in how they can build scale and could be devastating for mom-and-pop providers, but I can also see an argument for how a more sophisticated and better-capitalized home health sector will ultimately benefit consumers.
However, those positive outcomes will demand governmental regulators that not only pave the way for dealmaking but also monitor and pursue necessary actions to ensure that the incredibly large, powerful corporations that are increasingly dominating the at-home care market deliver on their promises to drive quality outcomes for patients.
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