Home health bidding wars heat up: Optum makes $3B unsolicited offer for Amedisys

The home health bidding wars are heating up as UnitedHealth Group's Optum unit is making a big play for home health and hospice firm Amedisys.

Just one month ago, Amedisys agreed to be bought by another healthcare company, Option Care Health, a provider of post-acute care and infusion services. That deal valued Amedisys at $3.6 billion. That deal was expected to close in the second half of 2023.

Optum has made an all-cash offer of $100 per share to Amedisys' board of directors, the healthcare behemoth announced Monday morning. The deal represents a "superior proposal for Amedisys shareholders, with price certainty at a 26% premium over most recent share price," Optum executives said. According to news reports, the deal is valued at $3.26 billion

Option Care Health proposed last month to buy the company for roughly $97.38 per share.

"On May 27, 2023, the Board determined that the unsolicited proposal received from Optum could reasonably be expected to result in an 'Amedisys Superior Proposal' as defined in Amedisys’ merger agreement with Option Care Health," Amedisys wrote in a filing with the Securities and Exchange Commission (SEC). "As permitted by the terms of Amedisys’ merger agreement with Option Care Health, Amedisys entered into a confidentiality agreement with Optum on May 30, 2023, and is currently engaging in exploratory discussions with Optum with respect to Optum’s proposal."

The Baton Rouge, Louisiana-based company provides home health, hospice and palliative care services and has approximately 18,000 employees and 522 care centers in 37 states and the District of Columbia.

In a note published Monday, William Blair analyst Matt Larew wrote that Optum’s offer to acquire Amedisys is "not overly surprising given the relatively modest breakup fee ($106 million) and the ongoing run on home-based labor being made by payers." 

"That it is Optum is somewhat surprising given that it closed the acquisition of LHC Group earlier this year and Amedisys and LHC Group were the two largest remaining independent home health businesses," Larew wrote.

While analysts anticipate regulatory scrutiny of any potential deal they also surmise that Optum’s experience with the Federal Trade Commission during the LHC process gives it confidence this deal would close as well, Larew noted

He also noted that there is not a dominant player in the home health market and a combined LHC Group and Amedisys would make up less than 10% market share and a lower percentage of the hospice market.

Option Care Health is a provider of post-acute care and infusion services. The deal with Amedisys would create a massive provider of post-acute care services encompassing more than 16,500 employees and 674 care centers in 46 U.S. states, with a projected $6.2 billion in annual revenue. The combination of the two will enable the companies to beef up capabilities and expand their footprints as care options increasingly move into patients' homes.

Option Care said its offer was still a "compelling all-stock transaction" with "near- and long-term value creation opportunities." In a statement issued Monday, the company said the proposed deal would result in the combined company generating more than $500 million in annual cash flow by 2025 and approximately $1 billion in combined adjusted EBITDA by 2027.

The combined company will generate more than $9 billion in combined revenue by 2027, Option Care executives said.

"Pur compelling all-stock transaction, expected to close in the second half of 2023, allows stockholders of both companies to participate in the upside of the combined company, which will be a differentiated leader in home health and alternate site care with unmatched scale and a unique cash flow profile," executives said.

In its SEC filing, Amedisys said it remains bound by the terms of the merger agreement with Option Care Health, and Amedisys’ Board has not determined that Optum’s proposal constitutes a Superior Proposal as defined in the merger agreement with Option Care Health. "The merger agreement with Option Care Health does not permit Amedisys to terminate the merger agreement in favor of an alternative transaction or to enter into any agreements with respect to an alternative transaction, other than a confidentiality agreement. Amedisys notes that there can be no assurance that the discussions with Optum will result in a transaction," the company wrote.

UnitedHealth Group's Optum is on the hunt for home health assets. The company shelled out $5.4 billion to pick up home health provider LHC Group.

Optum said acquiring Amedisys would accelerate the "seamless provision of value-based care in the home, improving patient outcomes and experiences."

"Amedisys’ commitment to quality and care innovation within the home, and the patient-first culture of its people, combined with Optum’s deep value-based care expertise can drive meaningful improvement in the health outcomes and experiences of more patients at lower costs, leading to continued growth," Patrick Conway, M.D., chief executive officer of Optum Care Solutions, said in a statement.

Amedisys expanded into the hospital-at-home market in 2021 when it acquired Contessa Health for $250 million.

In-home care is provided by thousands of organizations nationwide, with no single participant having more than a single-digit percentage share, a core reason Optum is confident it can secure approval for the combination, executives said in a press release.

"Even with the numerous providers, demand for in-home care far exceeds available supply, creating the need for substantial investment in the sector to more fully serve patients and their families with compassionate, high-quality care in the comfort of their own homes," Optum executives said.