What Optum’s $5.4B LHC Group Acquisition Says About the Future of Skilled Nursing Care

Optum, the health services arm of UnitedHealth Group (NYSE: UNH), has agreed to buy home health giant LHC Group (Nasdaq: LHCG) for a reported $5.4 billion. 

The blockbuster deal is the latest indication that the nation’s largest health care payers are driving a shift toward value-based care models that prioritize more services delivered in people’s homes — a trend that has implications for skilled nursing providers, including a rise in SNF-at-home models.

“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,” Optum Health CEO Wyatt Decker said in a news release.

The companies expect the transaction to close during the second half of the year. The agreement calls for the acquisition of LHC Group’s outstanding common stock for $170 per share.

Based in Lafayette, La., LHC Group has facilities across 37 states and the District of Columbia – reaching 60% of the country’s 65 and older population.

“Since our founding in 1994, ‘it’s all about helping people’ has been the core of our mission, and as part of the Optum team and its value-based capabilities, we will be able to expand our patient-centered mission and help drive best care practices across the country,” Keith G. Myers, LHC Group’s chairman and CEO, said in a news release. “Working together as organizations committed to caring for the most vulnerable in society will help us more effectively and efficiently deliver high quality and increasingly value-based care in the home.”

Deal shines brighter light on shift to home

The deal is yet another example of the increasing shift and focus toward home-based services for the senior care industry – especially as tightened margins continue to squeeze some skilled nursing operators out of the business.

The Biden administration, politicians and a majority of the American people have decided that home is the place they want to age.

Even though it appears to have been squashed in the halls of Congress, President Biden’s Build Back Better plan allocated $150 billion for in-home care, specifically funding to help reduce waiting lists for in-home care services and improve low wages for workers.

There’s also the Choose Home Care Act of 2021.

The bill was introduced in the U.S. Senate toward the end of July 2021, creating an add-on payment to traditional Medicare home health benefits for patients 30 days after their hospital discharge. A bipartisan effort, the legislation would give Americans more choices of where to recover following a hospital stay.

Myers said during Home Health Care News’ FUTURE conference in October that of the 2 million patients admitted to nursing homes every year, an anticipated 35% could be diverted to home care if the bill became law.

Skilled nursing operators like PruittHealth have already made moves to adapt to shifting consumer expectations by launching a SNF-at-home model.

PruittHealth took a $260 million revenue hit since the early days of the COVID-19 pandemic in March 2020 – but saw a 19% boom in demand for its home health services.

The deal is also a signal toward further interest toward value-based care.

Optum last summer hired former ProMedica Senior Care President David Parker as its vice president of strategy for its complex care management division.

Seen as the care delivery arm of UnitedHealthGroup, Optum has offered value-based care plans for more than 20 years, Parker told Skilled Nursing News in an interview last November.

Optum is looking to grow its relationships with provider-led institutional special needs plans (I-SNPs), as well as chronic condition, dual eligible and institutional-equivalent SNPs run by the provider.

“Obviously we still want and have a priority around our Optum-owned and operated I-SNP plan for UnitedHealth Group, but those that have decided that they want to lead their own plan … if you are going to do that, I think it’s best for both the patient and the outcome, and for the provider, that they do it with a proven and committed organization that brings value, that brings innovation and integrity and compliance,” Parker told SNN.