UnitedHealth Group will pay $5.4 billion to buy LHC Group and expand its home health business, which is expected to increase as the baby boomer generation ages.
In a deal scheduled to finalize later this year, the healthcare behemoth said Tuesday that it will pay $170 in cash for each share of LHC stock.
LHC Group Inc., which operates primary care clinics and surgery centers around the country, will be added to UnitedHealth’s Optum Health company, which manages the country’s largest health insurer.
According to Mizuho Securities USA analyst Ann Hynes, the transaction reflects “a strong strategic match” for Optum, given the growth potential in-home health care and UnitedHealth’s Medicare Advantage coverage.
Medicare Advantage plans are for persons 65 and older, as well as those with certain severe disabilities, and are privately administered versions of government-funded Medicare coverage.
Patients with injuries, diseases, or chronic ailments can receive in-home health care from the LHC Group. The corporation, based in Lafayette, Louisiana, has 964 locations in 37 states.
It has nurses and home health aides who follow doctor’s orders, as well as therapists who give physical, occupational, and speech therapy. LHC also has 170 facilities that provide end-of-life hospice care.
In recent years, health insurers and other payers have placed a greater emphasis on home-based care, a move fuelled by the COVID-19 pandemic. As the U.S. population ages and more people become eligible for Medicare, they expect this form of treatment to grow more popular.
In the United States, UnitedHealth and Humana are the two major suppliers of privately run Medicare Advantage programs. According to the non-profit Kaiser Family Foundation, which researches health care issues, they accounted for approximately 45 percent of the more than 26 million people registered last year.
The deal would be neutral for UnitedHealth’s adjusted earnings outlook in 2022, but will benefit it somewhat next year, the company said Tuesday. The deal must yet be approved by regulators and LHC Group shareholders.
LHC Group’s stock rose more than 6% on Tuesday, outperforming the Dow Jones Industrial Average by less than 1%. UnitedHealth Group Inc., a Dow component, saw its stock rise marginally.