The U.S. Division of Justice (DOJ) and 4 attorneys normal filed a lawsuit this week to dam the acquisition of Amedisys (Nasdaq: AMED) by UnitedHealth Group (NYSE: UNH). The DOJ's grievance is thorough, with some compelling arguments, and others much less so.

Residence care veterans have lengthy predicted a consolidation of the fragmented business. Nonetheless, the DOJ appears much less keen about this, not less than in relation to large-scale transactions.

Though it centered on a number of events it stated can be negatively affected by the deal – sufferers, payers and residential well being nurses – the DOJ's fundamental argument centered on the mixture of LHC Group and Amedisys.

UnitedHealth Group's Optum acquired LHC Group for $5.4 billion in 2023. A couple of months later, it agreed to accumulate Amedisys in a $3.3 billion all-cash deal, giving Possibility Care Well being (Nasdaq: OPCH ) was outbid for the house care supplier.

Corporations like LHC Group, Nearly Household, Amedisys and Kindred at Residence had been all as soon as unbiased, massive dwelling care suppliers. In a fragmented business, they stood out as leaders – and competed with one another. In 2017, LHC Group and Nearly Household agreed to merge in a 'merger of equals'. A couple of years later Optum acquired LHC Group. Humana Inc. (NYSE: HUM) has since acquired Kindred at Residence.

Amedisys and Enhabit Inc. (NYSE: EHAB) – the final of which went public in 2022 – had been two of the final pure play dwelling well being corporations on the general public market. Then, in fact, Optum agreed to accumulate Amedisys.

There are different dwelling well being suppliers available on the market, however none have the Medicare-certified dwelling well being footprints of the above corporations.

The DOJ considers this an anti-competitive downside for quite a lot of causes. In as we speak's members-only HHCN+ Replace, I'll delve deeper into these causes.

'Anti-competitive and unlawful'

The DOJ appears to be like totally different now than it can in a number of months after President-elect Donald Trump is inaugurated. The case towards the deal may theoretically be dismissed or settled as soon as that change happens.

To make sure, healthcare corporations vertically built-in massive property throughout Trump's first time period. However no deal was like this one.

General, the change in DOJ management didn’t imply abandoning most of these lawsuits.

“David Balto, a former antitrust official and lawyer in Washington, stated he anticipated the Trump administration would probably proceed pursuing the lawsuit, calling it comparatively easy and 'an everyday antitrust case,'” The New York Occasions wrote in its reporting on the lawsuit. “Moreover, he stated participation of the 4 states would additionally make it harder for the federal government to drop or settle the case.”

Tyler Giesting, director of well being care and life sciences at West Monroe, instructed me this week that the result of final week's election may make it harder for the DOJ to efficiently pursue its case “given Republicans' total view of closing offers.”

As for the case itself, the DOJ relied closely on feedback from Amedisys leaders to bolster their place, together with these from former CEO and present chairman Paul Kusserow.

The DOJ's grievance particulars the rivalry between LHC Group and Amedisys, with documented proof that leaders from each corporations prioritized profitable over one another, particularly in recruitment and market share. When LHC Group agreed to affix Optum, Amedisys leaders noticed it as a possibility to lure nurses and take market share from LHC Group, for instance.

“The truth that this merger would extinguish competitors on the expense of Individuals is not any secret,” the DOJ wrote in its grievance. “Certainly, each UnitedHealth and Amedisys acknowledge the worth that direct competitors between the 2 corporations supplies to sufferers as we speak. As the previous CEO and present chairman of Amedisys stated, the “pure competitors” between Amedisys and UnitedHealth implies that the 2 corporations “hold one another trustworthy and we proceed to pursue higher high quality. And who advantages from it? Our sufferers. ''

The DOJ additionally stated that prime Amedisys officers acknowledged in handwritten notes that becoming a member of Possibility Care Well being was a greater transfer for workers and sufferers. Possibility Care Well being agreed to accumulate Amedisys in Could 2023 earlier than UnitedHealth Group submitted a superior provide.

“The merger between Amedisys and OptionCare posed a aggressive risk to UnitedHealth's objective of 'exponential development,'” the DOJ wrote. “To forestall that, UnitedHealth was prepared to pay. And it did, each via what is often generally known as a “breakup payment” to Possibility Take care of terminating its merger with Amedisys, after which individually by attractive Amedisys with a $3.3 billion merger provide. Though Amedisys’ Chief Monetary Officer and Chief Working Officer acknowledged in handwritten notes that the OptionCare deal can be higher for each workers and sufferers, Amedisys finally agreed to be folded into UnitedHealth.”

Though Optum would solely personal about 10% of the house well being care market with Amedisys and LHC Group beneath its belt – a considerably small market share in comparison with the titans of another sectors – these two have vital overlap of their footprint, particularly within the Southeast the USA

In an effort to handle this overlap downside, Amedisys agreed to divest greater than 100 areas to dwelling care supplier VitalCaring. However the DOJ went towards VitalCaring as a divestiture accomplice. Furthermore, the corporate didn’t consider that the divestment package deal can be sufficient to resolve the complete overlap downside.

“Even when VitalCaring had been an satisfactory purchaser, the divestiture won’t resolve aggressive overlap in additional than 100 dwelling well being and hospice markets in 19 states and the District of Columbia, which account for greater than $1 billion in complete enterprise,” the corporate wrote. DOJ. . “The divestiture additionally doesn’t tackle the hurt that 1000’s of dwelling well being and hospice nurses are experiencing within the labor markets in 18 states. And the divestiture creates a brand new, probably anticompetitive and unlawful overlap round Biloxi and Gulfport, Mississippi.”

There are greater than 10,000 dwelling care businesses within the nation, however LHC Group (beneath Optum) and Amedisys are two of the highest employers. Any competitors between the 2 would scale back the mobility and incomes potential of dwelling well being care employees, the DOJ argues.

“Nurses who present dwelling well being and hospice companies obtain higher wages and advantages because of the direct competitors between UnitedHealth and Amedisys,” the DOJ wrote.

By detailing each the situation overlap and previous discussions surrounding the recruitment battle between the 2 suppliers by firm executives, the DOJ makes a powerful antitrust case towards the deal in relation to its influence on sufferers and residential well being care employees.

It provides many extra supporting factors in its 57-page grievance, which was filed in federal court docket on Tuesday.

Payer, worth influence

The place the DOJ's argument is much less convincing issues the potential improve within the “worth of dwelling well being care companies.”

Perhaps that's a blind spot from the DOJ on how dwelling well being care works within the US

Broadly talking, the DOJ argued that suppliers like LHC Group and Amedisys are gaining market share by accepting decrease charges from payers, preserving dwelling care prices low.

“For instance, Amedisys acknowledges that charges with Medicare Benefit plans are 'decreased by worth competitors,'” the DOJ wrote. “UnitedHealth's insurance coverage arm is performing accordingly because it has tried to withstand Amedisys' charge will increase for UnitedHealth's personal insurance coverage by 'cit[ing] That [Amedisys’s] charges are in keeping with one other nationwide supplier with an identical footprint (most probably LHC Group).'”

Whereas charges in conventional Medicare are usually uniform, Medicare Benefit plans negotiate fee with suppliers. The DOJ grievance acknowledges this.

Competitors can subsequently hold dwelling care charges low, however particularly for the payers themselves. Sufferers don’t instantly profit from this competitors, and neither do suppliers.

UnitedHealth Group is likely one of the beneficiaries of that system, with MA plans usually paying charges that don't cowl well being care prices for suppliers.

The DOJ's stronger argument would have been to recommend that UnitedHealth Group, now that it owns two of the most important dwelling care suppliers, may squeeze different dwelling care suppliers on funds. That, in flip, may negatively influence the operations of those suppliers (UnitedHealthcare is by far the most important MA operator), lowering entry to dwelling look after sufferers throughout the nation.

Paradoxically, one of many causes LHC Group joined Optum within the first place was the penetration of MA, which has decimated the house well being care business.

“We acknowledged that faster than numerous healthcare suppliers, simply due to the referrals we had been getting from hospitals,” Keith Myers, now CEO emeritus of LHC Group and particular advisor to Optum, stated at HHCN's FUTURE convention final yr. “We had been having a a lot greater share of managed care referrals coming our means, and we didn't have the assets to handle these sufferers, and we wished to handle them. The hospital wants us to handle them.”