The acquisition, announced Tuesday by UnitedHealth's Optum health-services arm, adds one of the country's largest home-health firms to a portfolio that already includes doctor groups, clinics, and surgery centers, as well as some home-based services.
Wyatt Decker, CEO of Optum Health, the company's healthcare division, stated that the company is seeing an increase in demand for home-based care from patients and families. "This trend of how much care can truly be delivered in the home has really only just begun," he said in an interview. "We can provide care at home, which is a less expensive setting...than nursing homes or more advanced care facilities."
Under the terms of the agreement, UnitedHealth would pay approximately $170 per share for LHC, which had approximately $2.2 billion in revenue last year and includes hospice, long-term-care hospitals, and other home-based services in addition to home health. This represents an 8.1 percent premium over Monday's closing stock price.
According to UnitedHealth, the deal is worth approximately $6 billion when debt is factored in. The acquisition is expected to close in the second half of 2022, according to the company.
Home-health care providers provide medical care to the elderly and others in their homes.
Health insurers, such as UnitedHealthcare, the largest in the United States, want to promote home health as a lower-cost alternative to nursing homes and a tool for reducing hospital stays, particularly among the Medicare population, which represents a lucrative growth engine for the industry. Under the federal program, managed-care companies sell private plans known as Medicare Advantage.
Humana Inc., UnitedHealthcare's main competitor in the Medicare market, completed its acquisition of Kindred at Home last year, spending approximately $5.7 billion for the remaining 60 percent of the company. Humana claims to be the largest home-health provider in the United States.
Demand for home health care has also been increasing as a result of an aging population and some families' reluctance to turn to nursing homes, particularly in the aftermath of the Covid-19 pandemic. According to the Centers for Medicare and Medicaid Services, spending on home healthcare is expected to increase from $121.6 billion last year to $226.4 billion in 2030.
The new agreement comes as UnitedHealth is being sued by the Justice Department for antitrust violations in connection with a previous acquisition of health-technology firm Change Healthcare Inc. In that case, antitrust regulators argued that UnitedHealth was at risk of controlling an overly broad slice of healthcare data, and that it could use its new asset to help its insurance unit compete.
UnitedHealth has stated that the Change agreement will reduce costs and improve customer service, and it has disputed the Justice Department's arguments.
LHC is headquartered in Lafayette, Louisiana. Many of the company's home-health and hospice operations are co-owned by hospital systems. The company operates in 37 states and claims to care for over 500,000 patients per year.
LHC, like other companies in its industry, has faced a labor shortage, and its earnings for the fourth quarter of 2021 fell short of analysts' expectations. According to the company, the situation improved in the first quarter, with better hiring and fewer employees quarantined due to the pandemic.