Medical worker examining patient

Optum’s acquisition of LHC Group Tuesday may have made a big news splash, but the deal was not exactly a surprise, finance and policy experts who follow the industry told McKnight’s Home Care Daily Pulse.

The purchase is in keeping with the trend of care moving into the home, said Tom Lillis, a partner with Stoneridge Strategic Consulting.

“It’s a microcosm of what’s happening in healthcare in general,” he said. “We’re seeing a decentralization, which was exacerbated by COVID and folks not wanting to be facility-centric.”

Initiatives such as hospital-at-home and skilled nursing facility-at-home represent this major home care push. And, aging baby boomers are creating a significantly older population in coming years, he added.

Good fit

It made particular sense for UnitedHealth, which owns Optum, to add home care to its portfolio, given its breadth of healthcare services, Julie Utterback, an analyst with Morningstar, noted.

“UnitedHealth and Humana already have substantial healthcare service operations, so at-home care is a natural extension of their existing healthcare service offerings,” she said in an email.

As UnitedHealth, the nation’s largest health insurer, wants to keep costs down, adding a home care business also makes sense from a fiscal standpoint, she said.

“I think adding healthcare services to insurer portfolios can help align incentives with their other operations, particularly medical insurance, which is a great way to help control costs throughout the organization, including in their Medicare Advantage plans,” she wrote. “At-home care can be cheaper than nursing homes or other acute-care settings like hospitals. And, in general, this acquisition highlights that meeting patients where they are most comfortable is becoming increasingly important.”

Emphasis on primary care

Anne Tumlinson, founder and CEO of ATI Advisory, which provides healthcare research and advisory services, pointed out the strategic benefits of pairing home health with primary care services. Optum, which bought in-home medical care firm Landmark Health last year, provides primary care, specialty care, urgent care and surgical care to 100 million consumers.

“Primary care and home health is a really nice combination because primary care refers to home health,” she said. “So if you’re a primary care group under Optum, probably you’re operating under a whole-risk contract under Medicare Advantage plans and you want to have a really tight network of providers, and Optum didn’t have home health. All the primary care assets and physician assets are really enhanced — value is enhanced — by having home health now as part of that continuum, and this is a theme we are seeing across different carriers.”

What’s next?

Given that this is the second major deal involving a health insurer purchasing a home care company — Humana bought Kindred at Home last year — one inevitable question arises: What home health company will fall next? Walgreens and CVS, pharmacy giants that have made investments in primary care and home care, emerged as good bets for potential acquirers. But Utterback said not so fast.

“For the other insurers and companies like Walgreens that are currently pushing into primary care practices, we think that adding at-home services may be a longer-term priority after establishing a more substantial footprint in healthcare services first,” she said.

Still, as more of the industry is consolidating and leveraging different aspects of the continuum, Tumlinson expects to see fewer “pure play” home health businesses.

“It doesn’t mean if you are a smaller provider you will get cut out, but some of these larger physician groups taking risk with MA are going to start working closely with these acquired assets, so that’s sort of the play,” she said.

LHC to stay LHC

Yet the acquisition is unlikely to change the character or operations of LHC, which owns hundreds of home health and hospice locations, Lillis commented. UnitedHealth tends to be hands-off with its acquisitions.

“LHC is going to have a lot of autonomy and stay corporately housed,” he said. “They’re going to do what they do.”