Yet another shoe has dropped in the UnitedHealth Group/Amedisys saga. Last week, the Justice Department — along with the Attorneys General of Maryland, Illinois, New Jersey, and New York — filed a lawsuit to block UHG’s $3.3 billion acquisition of home health and hospice company Amedisys through Optum.
In 2023, UnitedHealth Group’s Optum announced that it plans to acquire Amedisys, beating out Option Care Health. However, the healthcare giant has faced numerous challenges in finalizing the deal, with the DOJ scrutinizing the merger. Then in late June, UHG and Amedisys announced that they agreed to sell certain home health centers to VCG Luna, an affiliate of VitalCaring Group, as a way to push the deal through.
The divestiture didn’t satisfy the DOJ.
The DOJ’s complaint alleges that the deal would remove competition between UHG and Amedisys due to UHG’s previous acquisition of home health and hospice company LHC Group.
However, experts are unsure what the outcome of this lawsuit will be particularly under the incoming Trump administration, which may have a different M&A policy than the Biden administration. Some believe that the previous Trump administration was more favorable to large corporations, likely making blocking the UHG/Amedisys deal less of a priority, compared with the Biden administration that has favored giving power back to clinicians.
But even aside from the differences in governing philosophy, one expert noted that the main reason for antitrust lawsuits — prices would rise as a result of the transaction, hurting consumers and patients — seems to be missing from the equation here. That’s because of the outsized role Medicare and Medicaid play in the home health industry.
Why the DOJ is Suing
According to the DOJ’s complaint, “competition between UnitedHealth and Amedisys benefits millions of Americans who need home health or hospice services.” However, that competition would disappear if the proposed merger between Minnetonka, Minnesota-based UHG and Baton Rouge, Louisiana-based Amedisys went through. The agency alleged that the merger is “presumptively anticompetitive and illegal.”
The complaint also stated UHG’s plan to acquire Amedisys was part of “an intentional, sustained strategy of acquiring, rather than beating, competition.” In 2022, the healthcare giant recognized that home healthcare was a growing space and went on to buy LHC Group in 2023 for $5.4 billion. Also in 2023, Amedisys agreed to merge with infusion provider Option Care. However, UHG prevented this from happening by offering $3.3 billion to acquire Amedisys, as well as paying a breakup fee to Option Care for ending the merger with Amedisys.
The DOJ added that UHG and Amedisys are aware of their competition and how it benefits patients.
“As Amedisys’s former CEO and current Board Chairman said, the ‘pure competition’ between Amedisys and UnitedHealth means the two companies ‘keep each other honest and we keep driving better and better quality. And who benefits from it? Our patients,’” the complaint stated. “Today, UnitedHealth and Amedisys compete vigorously against each other across their home health and hospice businesses. Amedisys celebrates ‘stealing share’ from UnitedHealth and develops its strategy with UnitedHealth in mind. For its part, UnitedHealth has aspired to ‘put a dent in Amedisys.’”
By acquiring Amedisys, UHG would grow its home health and hospice footprint to five more states, as well as receive 500 additional locations across 32 states it already operates in. The deal would also give UHG control of at least 30% of the home health or hospice services in eight states.
The merger could also negatively affect home health and hospice nurses, as UHG and Amedisys are currently each other’s biggest competitors for employing nurses, according to the DOJ. The deal would take away competition for pay and leave fewer options for employment.
In addition, UHG and Amedisys’ proposed divestiture to VitalCaring is not enough for the deal to go through. VitalCaring will not make up for the competitive strength lost in the merger, as the company has only operated for three years, the DOJ said.
“Even if VitalCaring were an adequate buyer, the divestiture does not resolve the competitive overlap in over 100 home health and hospice markets across 19 states and the District of Columbia, accounting for well in excess of $1 billion in total commerce,” the DOJ said.
The divestiture also fails to address the harm caused to thousands of home health and hospice nurses in labor markets in 18 states, the DOJ added. Additionally, it forms a new anticompetitive and illegal overlap in the Biloxi and Gulfport, Mississippi area.
There are also larger healthcare implications at stake, the DOJ argued. If UHG successfully acquires Amedisys, then the three largest home health providers would be owned by the two largest Medicare Advantage insurers. UHG would have both LHC and Amedisys, while Humana bought Kindred in 2021. In other words, it would make UHG even more dominant than it already is.
“This merger would also further consolidate UnitedHealth’s standing as the dominant force in nearly every corner of the American healthcare system,” the complaint stated. “Over the past three years, UnitedHealth has spent more than $36 billion acquiring companies in a variety of healthcare settings, turning itself into the largest commercial health insurer in the United States; the largest employer of physicians; the second-largest pharmacy benefit manager; and one of the largest healthcare technology and service vendors.”
Amedisys and UHG’s Optum subsidiary, which would be acquiring the home health company, disagree that the deal is anti-competitive and launched a website addressing the DOJ’s complaint. On the website, the companies argue that once combined, they would operate only a “fraction” of home health and hospice markets nationally, and that the merger will not “adversely impact services” in the U.S.
In a statement, company representatives offered similar explanations.
“The Amedisys combination with Optum would be pro-competitive and further innovation, leading to improved patient outcomes and greater access to quality care,” an Optum representative stated. “We will vigorously defend against the DOJ’s overreaching interpretation of the antitrust laws.”
A spokesperson for Amedisys stated that it remains “committed to the transaction, which we believe will create more opportunities to deliver quality, compassionate and value-based care to patients and their families.”
Will the DOJ succeed?
It’s hard to say for sure what the outcome of the DOJ’s lawsuit will be, particularly with the change in administration.
“That presents, I think, a whole other set of questions around, ‘how much will the future FTC leadership and DOJ leadership continue to make this a priority as far as the lawsuit goes?’” said Tyler Giesting, director of healthcare and life sciences at Chicago-based West Monroe. “Or will that change, given the potential for a more dealmaking-friendly administration taking office again?”
Giesting’s comments were echoed by Dr. Adam Brown, an emergency physician and founder of healthcare advisory firm ABIG Health. While the DOJ under the Biden administration has been cracking down more on mergers and has been favoring giving power back to clinicians to promote competition, the previous Trump administration seemed to favor Medicare Advantage and corporations. Therefore, he’s not sure what will happen with this DOJ lawsuit when the new administration takes over.
Another healthcare expert noted that this is an interesting case because the federal government typically blocks proposed mergers on the grounds that the combined company could raise prices for consumers. The UHG/Amedisys deal, however, is different. Given that Medicare and Medicaid pay for 75% of expenses tied to the home health industry and only 25% is paid by commercial insurers, the government is actually the “price setter” for home health services, said Hal Andrews, president and CEO of Trilliant Health, a healthcare analytics company.
“As a result, the underlying rationale of the complaint isn’t really on price because an individual Medicare Advantage beneficiary is not really impacted by the ‘transfer pricing’ between two UnitedHealth subsidiaries,” Andrews said. “Instead, the complaint emphasizes the potential impact on quality of service and competitive compensation for home health aides and nurses if the merger was consummated, and it will be interesting to see if the judge believes that is enough to block the merger.”
Even if this merger with Amedisys doesn’t go through, Brown believes that UnitedHealth has built a company that is “too big to fail.”
“There are not a lot of tentacles that UnitedHealth does not have into our entire healthcare system,” he said. “That should give all of us a bit of concern when a corporation, singular entity, has that much market share, but not just in one singular sector, in multiple different sectors. It gives them a lot of power, and that gives the people that they’re trying to serve not a lot of control or power.”
Photo: Kritchanut, Getty Images