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Our Take: Option Care Health to merge with Amedisys, creating ‘end-to-end’ home-based health services platform

May 08, 2023

Bannockburn, Ill.-based Option Care Health, the largest independent provider of home and alternate site infusion services in the U.S., signed a definitive merger agreement with Amedisys, a leading provider of home health, hospice, palliative, and high-acuity care services based in Baton Rouge, La., to create a comprehensive home care platform with services ranging from preventive to end-of-life care.

The two companies will combine in an all-stock transaction that values Amedisys at approximately $3.6 billion, according to their announcement. Last year, the companies collectively generated revenue totaling $6.2 billion.

Under the agreement, Amedisys stockholders will receive 3.0213 shares of Option Care Health common stock for each share of Amedisys common stock they own. Based on the closing price of Option Care Health stock on May 2, the day before the deal was announced, that’s the equivalent of $97.38 per Amedisys share, representing a 26% premium to the May 2 closing price.

When the merger is completed, which the companies anticipate happening later this year, Option Care Health stockholders will own approximately 64.5% of the combined company and Amedisys stockholders will own the remainder.

The combined company will retain Option Care Health’s name and corporate headquarters in the Chicago area, along with “substantial operations” in Baton Rouge and Nashville, Tenn. It will have 674 care centers across 46 states and a clinical workforce of more than 16,500.

Option Care Health’s CEO, John Rademacher, will keep that title after the companies merge. Richard Ashworth, who just took on the role of CEO at Amedisys on April 10, will serve as an adviser.

Both companies’ boards have approved the merger, but it is still subject to the usual closing conditions, including shareholder and regulatory approval.

Our Take: The stated rationales behind the merger make sense, but we have to wonder whether the combined Option Care Health will be able to compete successfully with the giants already poised to dominate the home health care market.

“Health system referral networks are increasingly looking for a single provider partner for home health, infusion, and hospice pathways and transitions,” the companies said in their announcement. “Following the closing of the transaction, Option Care Health expects to be well-positioned to serve as that single partner with its offerings across the alternate site care spectrum. … Together, the companies are expected to expand relationships with commercial and government payers to deliver more affordable cost of care.”

Yes, by making Amedisys a subsidiary, Option Care Health will substantially increase the care services it now offers. And both companies will diversify their existing payer mix. According to Home Health Care News, 88% of Option Care Health’s payer mix is commercial and 76% of Amedisys’ payer portfolio is government.

Based on last year’s business, bringing the two companies together will result in a 65% commercial, 35% government payer portfolio, according to Rademacher.

The merger will also result in “a scaled national platform empowered to move deeper into a value-based care model,” the companies said.

Yes, the combined Option Care Health will be more attractive to ACOs, health systems, health plans, and government agencies that are driving the transition to value-based care than either legacy company would be on its own.

As Hospice News pointed out, home-based care and hospice providers have historically worked mostly within Medicare fee-for-service models, but that’s changing, and the new Option Care Health will be better positioned to compete in value-based care models.

Which brings us back to what we mentioned at the start of this editorial. We wonder how well the merged company will be able to compete with Optum, now that UnitedHealth Group has spent $5.4 billion to buy LHC Group and beef up Optum’s offerings in the home health care arena. And there’s Humana, which shelled out $8.1 billion in recent years to bring Kindred at Home in-house.

Amedisys shareholders are probably happy about the merger plans. They may have been a little uneasy when Amedisys spent $250 million a couple of years ago to expand into the hospital-at-home market through the acquisition of Nashville-based Contessa Health. But that decision is about to pay off if this deal with Option Care Health goes through.

Incidentally, the relationship between Amedisys and Option Care Health goes back to at least 2021, before the Contessa Health acquisition, when Amedisys launched a partnership with Option Care Health to deliver COVID-19 infusion treatments to patients in long-term care facilities.

Health Care Rounds: Organizational Performance and Physician Engagement, with HonorHealth’s Dr. John Neil

In large part, 2022 was a financially perilous year for health systems across the country. As provider organizations look to cut costs and maximize revenues, delivering care through value-based models becomes even more challenging and, potentially, rewarding. Today, Dr. John Neil speaks on the importance of leveraging physician engagement and clinical integration to align financial incentives and improve care outcomes. Dr. Neil is Executive Vice President, Chief Physician Executive and Network Strategy Officer for Scottsdale, Arizona-based HonorHealth.

What else you need to know
Eli Lilly’s donanemab significantly slowed cognitive and functional decline in individuals with early symptomatic Alzheimer’s disease in the Phase III TRAILBLAZER-ALZ 2 clinical trial, according to top-line results. Lilly said the trial met the primary endpoint and all secondary endpoints measuring mental and physical decline. Of note, participants treated with donanemab declined 35% slower than did those who received placebo, and 47% of the donanemab group had no clinical progression at one year, compared with 29% of the placebo group. Donanemab also significantly reduced brain amyloid plaque levels as early as six months after treatment began, Lilly said, adding that the company anticipates filing for the drug’s approval before the end of June. Amyloid-related imaging abnormalities indicating brain swelling (ARIA-E) occurred in 24% of the donanedab-treated participants, though most of them were asymptomatic. ARIA indicating brain bleeding (ARIA-H) occurred in 31.4% of the donanemab group and 13.6% of the placebo group. According to Lilly, the incidence of serious ARIA was 1.6%, “including two participants whose death was attributed to ARIA and a third participant who died after an incident of serious ARIA.”

In related news, 26 attorneys general signed a letter sent late last month to the Department of Health and Human Resources and CMS asking for antibody-based Alzheimer’s drugs such as Eisai and Biogen’s Leqembi (lecanemab) to be covered by Medicare without restrictions. (Currently, Medicare only covers drugs in this class for participants enrolled in an approved clinical trial.) When Leqembi received accelerated approval in early January, Eisai swiftly submitted a supplemental Biologics License Application requesting the drug’s full approval; the FDA could make a decision on that by July. CMS said at the time that Medicare would provide broader coverage if Leqembi is granted full approval. The same would hold true for other drugs in the class that receive full approval, including donanemab.

Astellas Pharma agreed to acquire Iveric Bio for $5.9 billion. Parsippany, N.J.-based Iveric Bio has been developing avacincaptad pegol, also known as Zimura, as a treatment for geographic atrophy, the advanced stage of age-related macular degeneration. A New Drug Application for avacincaptad pegol is under priority review at the FDA, with a decision expected by mid-August. Astellas signed a definitive agreement to acquire Iveric Bio for $40 per share, a 64% premium to the closing share price on March 31. The boards of both companies approved the acquisition, which is subject to customary closing conditions, including approval by Iveric Bio’s shareholders and regulators. The companies anticipate completing the transaction in the third quarter. In February, Apellis Pharmaceuticals’ Syfovre (pegcetacoplan injection) became the first drug to receive FDA approval as a treatment for geographic atrophy.

Johnson & Johnson’s consumer spinout, Kenvue, raised $3.8 billion Thursday in one of the largest health care IPOs in over a decade. Kenvue shares were priced at $22 and gained more than 20% on the first day of trading on the New York Stock Exchange. The IPO is expected to close on May 8; when it is completed, J&J will own more than 1.7 billion shares, or approximately 91%, of Kenvue’s common stock, J&J said in a press release. At the IPO price, Kenvue was valued at $41.5 billion, “instantly making it one of the biggest health care companies in the world,” Endpoint News reported.

Dr. Joon Sup Lee will become the new CEO of Atlanta-based Emory Healthcare on July 1. Currently, Dr. Lee, an interventional cardiologist by training, is executive vice president at the University of Pittsburgh Medical Center and president of UPMC Physician Services. He has been with UPMC for more than 25 years, according to Emory’s announcement. Dane Peterson, who is Emory Healthcare’s president and chief operating officer, has served as interim CEO since September.

Dr. Rochelle Walensky announced that she is stepping down as the director for the Centers for Disease Control and Prevention, effective June 30. “I took on this role with the goal of leaving behind the dark days of the pandemic and moving the C.D.C. — and public health — into a much better and more trusted place,” she said in an email to the agency’s staff.

What we’re reading 

Have Alternative Payment Models Led To Provider Consolidation? Health Affairs, 4.28.23

Essential Electronic Health Record Reforms for This Decade. JAMA, 5.4.23

Is Your Hybrid Team Losing Steam? Harvard Business Review, 5.5.23

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