UnitedHealth Group CEO: Home-Based Care Resonates Strongly with Payers

Through acquisitions and contracts with providers, more payers are going all-in on home-based care.

The quest for cost reductions, often through risk-based models, is leading a rising number of insurance companies and other payers to make (sometimes) huge investments in the space. Among them is UnitedHealth Care (NYSE: UNH).

These investments underscore the rising profile of the home setting within the health care system, according to UnitedHealth Care CEO Andrew Witty.

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“I’d really think about the way we’ve built the home capabilities as a substantial extension of what we’re able to do in the clinical space … That’s a super important part of the environment,” Witty said in an earnings call. “That is resonating super strongly, not just with UnitedHealthcare, but with other payers as well. And there’s no doubt that this side of the agenda has caught the imagination of other payers.”

The insurance company’s subsidiary Optum Health last year agreed to acquire the home health and hospice provider LHC Group (NASDAQ: LHCG) for $5.5 billion, expected to close in the first quarter of this year.

Reportedly, the two companies are hurdling through the customary procedures of a transaction. Both recently certified “substantial compliance” and no divestitures are expected, Dealreporter indicated last week

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A key attractor is the potential cost savings associated with risk-based payment systems like Medicare Advantage, in which UnitedHealth Care is of the largest players.

“For value-based patients, our in-home services have reduced hospital visits by 15% versus fee for service, delivering comparable health outcomes and achieving an NPS of approximately 80,” UnitedHealth Group President and COO Dirk McMahon also said on the call.

All in all, Optum expects to care for 750,000 new value-based patients during 2023 alone, the company reported.

The subsidiary saw a 16% earnings jump compared to the prior year’s quarter, reaching $47.9 billion. Its full-year 2022 revenue rose 27% year-over-year to $182.8 billion.

Consolidated fourth-quarter revenues for UnitedHealth Group totaled $82.8 billion in Q4, up 12% from $73.7 billion in Q4 2021. Full-year revenues increased $324.2 billion, up 13% year-over-year.

“You will see us both developing the platform of home care, increasingly, in a comprehensive fashion, as well as integrating home care within our clinic-based care model,” Optum CEO Dr. Wyatt Decker said in the earnings call. “It really creates two growth vehicles for us.”

As Witty noted, other payers also recognize opportunities in the home setting. This includes Humana Inc. (NYSE: HUM), which in 2021 purchased 100% ownership of Kindred at Home for $5.7 billion.

But as more payers join the national conversation about home-based care, the word “hospice” is often absent. More often, the focus centers on home health and home care, often in conjunction with Medicare Advantage.

Last summer, Humana divested a 60% stake in Kindred at Home’s hospice segment to the private equity firm Clayton, Dubilier & Rice for $2.8 billion. Humana retained the remaining 40%.

Time will tell where hospice will fit into the equation when it comes to payer investments. In the long run, this could depend in part on the outcomes of the hospice component of the value-based insurance design (VBID) model.

The four-year program — often called the Medicare Advantage hospice carve-in — launched Jan. 1, 2021, with 53 participating health plans. This year 119 plans are participating, according to the U.S. Department of Health & Human Services (HHS). Geographically, the program will be available in 806 counties in 24 states, up from 461 in 2022.

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