The acquisition of the home health and hospice provider Amedisys by the insurance mammoth UnitedHealth Group (NYSE: UNH) has far-reaching implications for the hospice community.

The UnitedHealth Group subsidiary Optum, in June 2023 inked its agreement to acquire Amedisys in an all-cash transaction of $101 per share, or about $3.3 billion. After leaping a series of regulatory hurdles, including a U.S. Justice Department lawsuit, the deal closed in mid-August.

The acquisition shines a spotlight on the growing importance of home-based care in the continuum, but could accelerate consolidation in the space, according to James Dismond, CEO of MiraSol Health.

“The UnitedHealth Group–Amedisys transaction represents a structural moment for the entire hospice industry, one that is likely to accelerate vertical integration pressures,” Dismond told Hospice News. “By combining payer power with home health and hospice assets, UnitedHealth is indicating that insurers view these services not as peripheral, but as central levers to control costs, improve care coordination and capture value across the continuum. This will likely force other hospices to either align with payers or larger delivery systems or risk being marginalized in negotiations and market access.”

Amedisys offers home health, hospice and palliative care, among other services to more than 465,000 patients annually across 38 states and Washington D.C. On a consolidated basis, Amedisys earned $621 million in net service revenue during Q2, up from $591.2 million year over year. Its hospice segment brought in $215 million, up from $204 million in the prior year’s quarter.

The merger likely makes UnitedHealth Group one of the largest hospice providers in the United States.

Amedisys is the second large-scale acquisition of a home health and hospice company by UnitedHealth Group. Its subsidiary Optum in 2023 also purchased LHC Group for $5.4 billion

The Amedisys transaction is the latest major step in the emergence of “payviders,” payer companies that also own health care provider businesses that span the continuum. The growing prevalence of these organizations represents a potential sea change in health care.

In addition to UnitedHealth Group, fellow insurance giant Humana (NYSE: HUM) has also acquired and operates a number of provider operations, including its home health platform Centerwell. Numerous smaller and regional payers, including some nonprofits, have also invested in the provider space.

Driving this trend is a quest for cost reductions. Payers are increasingly recognizing the value of health care delivered in the home as the lowest cost setting of care. Services like home health, palliative care and hospice also have a strong track record for reducing expensive hospitalizations, readmissions and emergency department visits.

Also, by controlling both the payer and the provider sides of the equation, “payviders” can better manage financial risk associated with value-based reimbursement models such as Medicare Advantage. UnitedHealth Group, for example, is the largest Medicare Advantage organization in the nation, operating more MA health plans than any other insurance company.

These large acquisitions also could signal a time of stepped up regulatory pressure on these kinds of transactions.

“The deal highlights the growing role of regulatory oversight, with the Department of Justice requiring the divestiture of more than 160 locations,” Dismond said. “This signals that while scale is attractive, future deals in the hospice market will draw closer scrutiny and require careful structuring to avoid antitrust concerns.”

The divestiture was part of the agreement between Amedisys, UnitedHealth Group and the Justice Department that allowed the deal to go through after years of wrangling. The Justice Department had filed a lawsuit against the companies due to antitrust concerns. The state attorneys general of Maryland, Illinois, New Jersey, and New York were also plaintiffs in the suit.

DOJ’s chief concern was that the combination of the two companies would dampen competition in the hospice and home health space. If the transaction has proceeded without the divestiture, Optum would have control 30% or more of the home health or hospice services in eight states, according to the Justice Department’s complaint. The deal would have expanded Optum’s home health and hospice footprint to five additional regions, allowing the company to gain nearly 500 locations in 32 states.

The parties to the lawsuit on Aug. 7 reached a deal that would allow the transaction to go forward. It included the mandated divestiture of 164 Amedisys and UnitedHealth Group care home health and hospice locations across 19 states. The companies found buyers in The Pennant Group (Nasdaq: PNTG) and BrightSpring Health Services (Nasdaq: BTSG).

The divestiture also includes one palliative care facility. The total divestiture accounted for $528 million in revenue.

The agreement would also impose a monitor to supervise UnitedHealth’s divestiture of the assets and compliance with an associated consent decree. Amedisys would also have to pay a $1.1 million civil penalty, as well as provide antitrust compliance training to its leadership.

This could spell more enhanced scrutiny for large health care transactions. However, the changeover in presidential administrations creates some uncertainty. Anti-trust cases were a major priority for the Biden administration, whereas President Donald Trump’s position on these matters remains to be seen.

The Amedisys deal could have other ripple effects on the M&A market. For instance, one less buyer is on the playing field. Amedisys was an active acquirer of home health and hospice assets for many years, as was LHC Group. Now, the hospice M&A market has one less competitor, according to Mark Kulik, senior managing director for the M&A advisory firm The Braff Group. This could have an impact on valuations in the space.

“The filter for any decisions to acquire a company is now going to be through one funnel, one entity,” Kulik told Hospice News. “That would certainly reduce what would have been maybe a broader sweep of desirable acquisition targets to a more narrow one. It also takes one very competitive buyer off the market and combines it with another. So you’re looking at just one less competitive leveraging buyer out there, elevating or boosting, potentially, the valuation of any given hospice agency.”

Conversely, the M&A market is now confronted with a mega-buyer, a company that is so large and well-resourced that it can afford to pay a premium for strategic assets, particularly in Certificate of Need (CON) states, Kulik said.

“It may boost some valuations in CON states, because you have an enormously deep-resourced buyer in United-Optum. They can go into any CON state, and, if they really want it, or if they see it’s a gap in their coverage or their footprint, say, ’I’ll dig a little bit deeper into my pockets here.’ Other buyers would have a lower threshold of economic ability to do that where United has billions, maybe trillions, of dollars available if they really wanted to go after something.”