Option Care Health’s plan to buy home care giant Amedisys for $3.6 billion continues a trend of providers, payers and retailers hoping to cash in on the lucrative market of baby boomers who increasingly prefer to get healthcare at home and age in place.
The proposed merger between Option Care Health, the nation's largest private home infusion provider, and Amedisys’ home health, hospital at home and palliative care businesses would create a single company with a broad array of in-home healthcare services across 46 states.
The home care and home infusion segments "continue to grow in their allocation of Medicare payments and are highly desirable by acquirers for their growth potential and cost efficiencies,” said Andre Ulloa, a partner in the advisory firm M&A Healthcare Advisors.
The deal, announced Wednesday, echoes other major transactions involving home care companies in recent years. The largest such acquisition was Humana’s purchase of Kindred at Home for $8.1 billion, which it completed in 2021. The Louisville, Kentucky-based health insurance company folded Kindred into its CenterWell brand last year.
When the deal closed, Humana President and CEO Bruce Broussard said the home health company would help improve patient outcomes and reduce the total cost of care, especially for Medicare Advantage plan members. In the first quarter of 2023, the insurer reported its CenterWell home health segment had increased admissions 7.1% year over year to more than 96,000 patients.
In March, CVS Health, Aetna’s parent company, closed on its acquisition of tech-enabled home care platform Signify Health for $8 billion. The retailer outbid Amazon, UnitedHealth Group and Option Care Health for the platform, which provides home health risk assessments and other services.
One month earlier, UnitedHealth Group closed on its $5.4 billion purchase of Lafayette, Louisiana-based home health and hospice company LHC Group. UnitedHealth folded the business into its Optum health services division.
More potential deals
Interest in home health and hospice from corporate buyers and private equity firms began heating up before the COVID-19 pandemic due to aging demographics. Accelerating that trend, patients and healthcare providers increasingly preferred in-home treatment to avoid possible transmission of the coronavirus.
In 2019, the industry tallied 118 deals, according to mergers and acquisition advisory firm Mertz Taggart. The number increased to 154 deals in 2020 and 177 in 2021, before declining to 104 in 2022. Many of the acquisitions included smaller, regional agencies. Analysts mostly attribute the recent decline to private equity investors scaling back acquisitions amid rising asset valuations and interest rates.
Still, the nearly $300 billion home care industry is highly fragmented, offering plenty of potential deals. Ulloa estimates there are more than 11,000 Medicare-certified home health agencies and more than 4,000 hospice agencies.
A few national home health and hospice organizations could be acquisition targets or acquirers themselves. These companies include Frisco, Texas-based Addus HomeCare, valued at $1.28 billion; Eagle, Idaho-based Pennant Group, valued at $370 million; and Atlanta-based Aveanna Healthcare, valued at $201 million.
Addus HomeCare operates in 22 states, offering both home healthcare and personal care services. Chairman and CEO Dirk Allison said he believes his company’s personal care business sets it apart, helping Addus stay independent and possibly giving it the financial heft to be an acquirer.
“We believe that putting home health and personal care together is a real benefit when we start expanding into value-based care,” Allison said. “We are looking for ways to cut costs while improving quality, and we believe you need both.”
Growth in Medicare Advantage and the move to value-based care could lead home care organizations, and their acquirers, to broaden their offerings. As payers become more vertically integrated, they are seeking ways to keep patients healthy and control costs. To that end, the companies may look to add other services beyond home healthcare, such as behavioral health and physical therapy.
In announcing the Amedisys deal, Option Care Health President and CEO John Rademacher acknowledged that future acquisitions across the healthcare continuum may be on the horizon.
“Knowing that the model is going to evolve, we want to be a part ... of that evolution,” Rademacher said.