UnitedHealth Group (NYSE: UNH) is leveraging its subsidiary Optum to drive growth in value-based care arrangements, with building out its home-based care capabilities as a high priority.
This drive is evidenced by Optum’s pending acquisition of Amedisys (NASDAQ: AMED) and its purchase of home health and hospice provider LHC Group, which closed in February.
By the end of 2023, OptumHealth, which contains the home health and hospice business, will have gained 900,000 new patients under value-based arrangements, according to UnitedHealth Group CEO Andrew Witty. This brings 4 million to the total number of patients Optum serves through accountable care relationships.
“In recent years, we’ve invested significant resources in building our capabilities to care for people most effectively for the life or health state they find themselves in, whether they need preventative or palliative care, or are best served in a clinic, at home or virtually,” Witty said in a third quarter earnings call. “In particular, we’re advancing our ability to care for people in their homes and integrating that physical care with our pharmacy and behavioral offerings.”
Optum’s third quarter revenues grew 22% year over year to $56.7 billion, though its operating margin dipped to 6.9% in Q3 compared to 7.9% in the prior year’s quarter. Witty attributed the margin compression to investments in services provided to patients.
Operating earnings were $3.9 billion compared to $3.7 billion last year. The operating margin of 6.9% compares to 7.9% in the prior year, reflecting investments in services provided to patients and customers to support growth.
Among those investments are the company’s home health and hospice acquisitions. UnitedHealth Group has intensified its interest in the provider space, with Optum as its spearhead.
Optum in June penned a deal to acquire Amedisys in an all-cash transaction of $101 per share, or about $3.3 billion. The transaction followed a previous offer to acquire Amedisys by the home infusion company Option Care Health (NASDAQ: OPCH) for $3.6 billion.
The UnitedHealth Group subsidiary closed its $5.4 billion acquisition of LHC Group in February, citing the growing prevalence of home-based care as a driver for these investments. Another factor is the rising tide of Medicare Advantage, particularly on the home health side. UnitedHealth Group is the largest operator of MA plans in the country.
These factors are also driving growth in the OptumHealth segment, which saw Q3 revenue rise 29% year over year to nearly $24 billion, up from $18.4 billion in the third quarter of 2022.
Overall, UnitedHealth Group’s revenue grew 14% to more than $92 billion in Q3.
“The sources of this growth will drive many more years of strong performance,” Witty said. “Value-based care is the centerpiece of our long term strategy, precisely because it delivers on the promise of high quality clinical outcomes and experiences at lower cost than traditional models.”
Companies featured in this article:
Amedisys, LHC Group, Optum, Optum Health, UnitedHealth Group
