AP Health Writer (AP) — UnitedHealth Group will spend $5.4 billion to acquire LHC Group and delve deeper into home health, an area of care expected to grow as baby boomers age.
The health care giant said Tuesday that it will pay $170 in cash for each share of LHC’s stock in a deal expected to close later this year.
UnitedHealth, which runs the nation's largest health insurer, will add LHC Group Inc. to its Optum Health business, which operates primary care clinics and surgery centers around the country.
The deal represents “a nice strategic fit” for Optum, given the growth potential in home health care and UnitedHealth's Medicare Advantage coverage, Mizuho Securities USA analyst Ann Hynes said in a research note.
Medicare Advantage plans are privately run versions of government-funded Medicare coverage for people who are 65 or older or those who have certain severe disabilities.
LHC Group provides in-home health care to patients dealing with injuries, illnesses or chronic conditions. The Lafayette, Louisiana, company has 964 locations in 37 states.
It provides nurses and home health aides who care out doctor treatment plans and therapists who offer physical, occupational and speech therapy. LHC also provides end-of-life hospice care through 170 locations.
Health insurers and other payers have been emphasizing home-based care more in recent years, a trend fueled by the COVID-19 pandemic. They expect this type of care to remain popular as the U.S. population ages and more people become eligible for Medicare.
Patients generally prefer home health care. Technology improvements also allow for more care to be provided at home, and payers see the practice as a good alternative to expensive stays in hospitals or care centers when possible.
Health insurers also have been emphasizing more regular care for their customers in order to keep people healthy and out of hospitals.
Last year, UnitedHealth rival and Humana spent $5.7 billion to expand its home health business.
UnitedHealth and Humana are the two largest providers of privately run Medicare Advantage plans in the United States. Together, they accounted for about 45% of the more than 26 million people enrolled last year, according to the non-profit Kaiser Family Foundation, which studies health care issues.
UnitedHealth said Tuesday that the deal will be neutral to its 2022 adjusted earnings forecast but will modestly help it next year. Regulators and LHC Group shareholders still need to approve the acquisition.
Shares of LHC Group climbed more than 6% Tuesday while the Dow Jones industrial average was up less than 1%. Shares of UnitedHealth Group Inc., a Dow component, rose slightly.