UnitedHealth Group is paying $5.4 billion to acquire LHC Group, a Louisiana-based home-care company, in a deal that pushes the Minnetonka-based health care giant further into direct patient care.
UnitedHealth Group paying $5.4B for Louisiana-based home health firm
The deal is the latest example of the company's push into direct patient care in settings outside hospitals.
March 29, 2022 at 12:39PM
Assumption of some debt takes the total value of the deal to about $6 billion.
The purchase marks the first acquisition by UnitedHealth Group of a traditional home-care agency, although the company in recent years has made other moves to provide more care in patient homes.
The acquisition comes amid a wave of consolidations in the home-care sector. Notably, Kentucky-based Humana — another health insurance giant — announced in April 2021 a $5.7 billion deal to acquire full ownership a large home care company.
UnitedHealth Group operates the nation's largest health insurer, UnitedHealthcare, as well as a fast-growing division for health care services called Optum. LHC Group will become part of Optum Health, which already owns a growing network of medical offices, urgent care clinics and surgery centers across the country.
"LHC Group's sophisticated care coordination capabilities and its warm, human touch is so important for home care, and will greatly enhance the reach of Optum's value-based capabilities along the full continuum of care, including primary care, home and community care, virtual care, behavioral health and ambulatory surgery," said Dr. Wyatt Decker, the chief executive at Optum Health, in a statement.
Optum says the deal will advance "value-based care" contracts. Rather than collect a fee for each service provided, insurers in such contracts set budget targets for health care providers to encourage cost control. The agreements include measures and goals for quality, as well, insurers say.
On behalf of its health care providers, Optum says it has negotiated these contracts with more than 100 health plans, including UnitedHealthcare.
Optum's position as a service provider to many insurers — including the carrier owned by its corporate parent — is being questioned in the Justice Department's legal challenge of UnitedHealth Group's proposed acquisition of Change Healthcare. Based in Tennessee, Change sells technology for data transactions between insurance companies and health care providers.
With some 30,000 employees, LHC Group provides home health, hospice and community-based services, as well as some facility-based care, across 37 states and the District of Columbia.
UnitedHealth Group is paying $170 a share for the company. The deal is expected to close in the second half of 2022.
The home-care sector is going through a consolidation phase driven by cuts in government reimbursement, LHC Group officials said in a March 2020 presentation to investors.
"Transition to valued-based reimbursement and highly coordinated care greatly benefits in-home care," the company said at the time. "Risk-bearing entities are looking to us for post-acute cost and care management."
While a large chunk of LHC Group's operations are in the southeastern U.S., the company has a few locations in Wisconsin. The company's co-founders will personally invest $10 million in UnitedHealth Group stock once the deal closes.
The acquisition is expected to be neutral to UnitedHealth Group's outlook for adjusted net earnings per share in 2022, while "modestly" adding to earnings next year.
For many years, UnitedHealth Group has run a program called "HouseCalls" that sends nurses to patient homes for wellness checks, often as part of coverage through Medicare Advantage health plans.
In February 2021, Optum reportedly purchased California-based Landmark Health. On a company website, Optum says Landmark provides "in-home medical care to seniors living with multiple chronic, complex conditions, helping to reduce hospital admissions and ER visits."
The Twin Cities has seen at least two examples in recent years of broader shifts in the home-care market driven in part by changes with government reimbursements.
Late in 2019, Bloomington-based HealthPartners announced it was closing its home-health business. Then, in the fall of 2020, Minneapolis-based Fairview Health Services sold 80% of its hospice and home-care business to a Texas company for $53.6 million.
The Minnetonka-based health insurer says the new contract “ensures continued, uninterrupted network access” to hospitals and clinics at the Bloomington-based health system.
