Illustration of house wearing a stethoscope
UnitedHealth Group's Optum is forking out $5.4 billion in cash to penetrate home-based care after inking what Axios has just learned was a $1.2 billion deal to stake a material foothold in a red-hot sector: behavioral health.
Driving the news: UnitedHealth, via Optum Health, has agreed to acquire home care company LHC Group (NASDAQ: LHCG) for about $170 a share, an 8.1% premium over LHC's closing share price Monday.
- LHC shares were up 6.7% in mid-morning trading on Tuesday.
- SVB Leerink and Jefferies are advising Lafayette, Louisiana-based LHC on the deal, which is expected to close in H2.
Be smart: LHC, with 30,000 employees focused on home-based care, is known for its joint-venture model with hospital systems, and hence, the deal appears to strategically align with other assets under the Optum umbrella.
- Optum already serves a staggering number of hospitals with various data, analytics and tech products.
The big picture: Besides Humana, no other big payer has made a meaningful move into Medicare home health, despite the pandemic-accelerated growth of the end-market.
- LHC says it reaches 60% of the U.S. population aged 65 and older via home health, hospice and home- and community-based services.
- This complements Optum Health's existing primary care and ambulatory surgery center operations.
Yes, but: Optum is getting into home health just as Humana attempts to partly get out.
- Humana, which bought the remaining stake of Kindred at Home last year, is currently seeking a buyer for the division's hospice arm, Axios reported in late January. Outcome? TBD.
State of play: As Optum gears up to defend its $13 billion deal for health tech firm Change Healthcare at an August trial, it's spending billions scooping up providers in the end-markets that arguably matter most.
- Axios reported less than a week ago that Optum is buying Refresh Mental Health from Kelso & Co, just 15 months after the PE firm bought the behavioral health network in a $700 million-plus transaction.
- Multiple sources have since told Axios that the deal values Refresh at $1.2 billion, reflecting a roughly 20x or 22x multiple of EBITDA, depending on which figure is looked at. Optum and Kelso declined to comment.
The bottom line: If our sources are right, expect the prolific acquirer's buying spree on the provider and physician side to continue in the days and weeks ahead.
Sarah Pringle co-authors the Axios Pro Health Tech deals newsletter. Start your free trial at AxiosPro.com.