UnitedHealth Group (NYSE: UNH) has agreed to buy LHC Group (NASDAQ: LHCG) for a reported $5.5 billion. The insurance company will integrate LHC Group with its existing home health asset, Optum Health.
The massive deal follows last year’s acquisition of Kindred at Home by United’s competitor, Humana Inc. (NYSE: HUM) for $5.7 million. The two transactions signal payers’ growing interest in the provider space.
Both acquisitions are among the largest in recent memory among hospice or home health companies.
“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,” said Keith G. Myers, LHC Group’s chairman and CEO. “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.”
The purchase agreement reportedly calls for United to acquire LHC Group’s common stock for $170 per share in case. The companies expect the transaction to close during the second half of the year.
A Lafayette, La.-based hospice, home health and facility- and community-based care provider, LHC Group has locations across 37 states and the District of Columbia, reaching 60% of the country’s 65 and older population.
The company last year saw a record number of its own acquisitions, with the crown jewel being the purchase of home health and hospice operations in 22 states from the joint venture between Brookdale Senior Living (NYSE: BKD) and hospital system HCA Healthcare (NYSE: HCA).
The transaction included 11 hospice, 23 home health and 13 therapy locations. LHC Group expects these assets to generate nearly $146 million annually, but the sale price was not disclosed.
The company’s overall revenue rose by 7.6% in 2021, reaching $2.22 billion. At more than $3.1 million, the hospice segment accounted for 14.1% of this revenue, up from $2.4 million in 2020.
Looking ahead, LHC Group expects revenue in 2022 to be in the range of $2.5 billion to $2.55 billion, though these numbers were projected prior to the UnitedHealth announcement.
“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,” said said Wyatt Decker, CEO of United subsidiary Optum Health. “We greatly admire how the people of LHC Group have created a culture that enables them to be a trusted health care partner to patients and their families when they need it the most, and we look forward to working with and learning from them.”
The M&A market for healthcare companies continues to strengthen in 2022 ahead of projected increases in US capital gains taxes. There is unprecedented capital in market, the lowest interest rates in US history and strong acquirer motivations for high quality healthcare companies. Across the continuum of care, buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
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