UnitedHealth Agrees To Buy Home-Care Provider LHC For $5.4 Billion In Cash

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by Tyler Durden
Tuesday, Mar 29, 2022 - 01:35 PM

In one of the biggest deals yet involving a home-based health-care provider, UnitedHealth, the largest purveyor of health insurance in the US, has reportedly agreed to buy LHC Group for about $5.4 billion in cash (about $170/share), according to a WSJ report published Tuesday morning.

The acquisition is being carried out by UnitedHealth's Optum health-services arm, the company's managed-care provider, and is expected to be officially announced later on Tuesday. The strategic deal comes as an aging US population exhibits rising demand for 'home-based' health-care following a once-in-a-century pandemic that made leaving home more treacherous for millions of vulnerable seniors.

Optum Health CEO Wyatt Decker told WSJ that his company has seen dramatically rising demand from patients and families for home-based care.

"This trend has really only just begun, of how much care can truly be delivered in the home," he said in an interview. "We can give care in the home, which is a lower-cost setting…than nursing homes or more advanced care facilities."

Optum has been on a bit of a buying spree this month, having reportedly agreed just last week to buy Refresh Mental Health, according to an Axios report.

LHC had about $2.2 billion in revenue last year. It provides hospice care, long-term-care hospitals and home-based services like home health. UnitedHealth's buyout price represents a premium of 8.1% over LHC's valuation as of Monday's close. Including debt, the deal has an enterprise value of $6 billion.

UnitedHealth expects the acquisition to close during the second half of 2022.

LHC shares rallied in premarket trading on the news.

The strategy behind the deal is simple: health-care providers are aiming to promote home-based health-care as a cheaper alternative to nursing homes and hospice care for elderly Americans.

UnitedHealth isn't the first insurer and managed care provider to complete a deal for a home-based care company.

Humana, the company's biggest rival in the Medicare business, completed an acquisition of Kindred at Home last year, spending about $5.7 billion for a 60% share in the company. Humana says the deal made the largest home-health provider in the US.

Spending on home healthcare, estimated at $121.6 billion last year, is projected to grow to $226.4 billion in 2030

Of course, the deal isn't guaranteed to close: The DoJ is already trying to block UnitedHealth from completing a previous deal for health-care technology firm Change Healthcare. The DoJ insists that controlling Change Healthcare would give UnitedHealth too much control over the health-care data market, which it could then use to give its insurance products an unfair advantage.