Our Take: Amazon, UnitedHealth Group complete their respective multibillion-dollar mergers
Two much-anticipated mergers closed last week, with Amazon finalizing its acquisition of the primary care chain One Medical for $3.4 billion and UnitedHealth Group completing its acquisition of home health company LHC Group for $5.4 billion.
The Federal Trade Commission sought information multiple times after the proposed transactions were announced last year, leading to speculation that the federal government might try to prevent one or both deals from taking place. In the end, the FTC said it would not sue to block either acquisition for antitrust concerns, although a spokesman said the regulatory agency’s investigation of the Amazon deal is not over.
“The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical,” Douglas Farrar said.
UnitedHealth Group announced last March that it would acquire Lafayette, La.-based LHC Group for $170 per share and integrate it with Optum Health, UnitedHealth’s care delivery arm, which encompasses primary, specialty, urgent, and surgical care services.
Although no public statement was made last week, LHC Group acknowledged the closing of the merger in a Securities and Exchange Commission filing Wednesday.
“As demand for care in the home increases, [the combination of the two companies] will help elevate the health care experience for the people Optum and LHC Group serve, prioritizing quality and seamless coordination that reduces fragmentation and complexity,” LHC Group stated in the filing.
The home health and hospice company has about 30,000 employees and more than 960 locations in 37 states; many of its operations are owned in partnership with health systems. LHC Group reported revenue of $2.2 billion in 2021.
Amazon announced its plans to acquire San Francisco-based One Medical in July for $18 per share in cash. On Wednesday, Amazon CEO Andy Jassy posted a letter on Amazon’s website welcoming One Medical and noting Amazon’s mission “to make it dramatically easier for customers to get what they need to stay healthy.”
“Together, we believe we can make the health care experience easier, faster, more personal, and more convenient for everyone,” Jassy said in a separate press release.
One Medical’s CEO, Amir Dan Rubin, said in the press release, “One Medical has been on a mission to help transform health care through its human-centered and technology-powered model to delight people with better health, better care, and better value, within a better team environment. We now set our sights on delivering even further positive impacts for consumers, employers, care teams, and health networks, as we join Amazon with its long-term orientation, history of invention, and passion for reimagining a better future.”
Rubin will stay on as CEO of One Medical, which offers its 836,000 members primary care virtually and at more than 200 physical locations in 27 markets throughout the country.
To attract new members to One Medical, Amazon is offering a discounted price on memberships. Normally, an annual membership costs $199, but for a limited time Amazon is charging new customers $144 for the first year.
Just before the acquisition was finalized, One Medical released its earnings report. Although the company has yet to turn a profit, its revenue for 2022 was up 68% from the previous year, at $1.05 billion. Its net loss for the year was $397.8 million.
Our Take: After UnitedHealth completed its highly controversial, $8 billion acquisition of Change Healthcare last year, the LHC Group transaction seems anticlimactic.
With the demand for and popularity of home health care on the rise, it was inevitable that UnitedHealth would bring a home health care provider beneath its umbrella. LHC Group is one of the country’s largest providers of home health and hospice services, making it an obvious choice. Plus, UnitedHealth stands to benefit from all of those health system partnerships.
The real sizzle is Amazon’s new acquisition. As Advisory Board’s Ty Aderhold and John League put it when the proposed deal was announced, the One Medical transaction “is among the biggest investments ever in care delivery by a non-health care entity.”
Aderhold and League also brought up the possibility that Amazon could bundle its health-related services and products — for instance, One Medical’s virtual and in-person care, PillPack’s prescription services, wearables, and home monitoring with Halo and Alexa — to create a “potentially powerful, differentiated bundle” that could appeal to payers and self-funded employers.
And, as Aderhold and League noted, Amazon now has a built-in opportunity to expand into the Medicare Advantage market. In 2021, One Medical acquired Iora, a “human-centered, value-based primary care organization” focused on serving Medicare populations, for approximately $2.1 billion.
Amazon keeps trying to make health care more affordable and accessible, with some of its efforts more successful than others. So far, the company has been fairly quick to cut its losses when an attempt doesn’t pan out as hoped, but the One Medical acquisition isn’t something Amazon can easily scrap.
While the FTC could unwind the deal if it determines that Amazon is misappropriating customers’ personal health information obtained through One Medical, Advisory Board’s Vidal Seegobin said the biggest threat to the deal is Amazon itself.
“Anyone who operates a health care business and tries to connect and scale up assets can tell you that success is made and broken on execution,” Seegobin said. “Integration of health care assets is not a given. You must work hard to build it (and even harder to maintain it). And given the splashy failures of Amazon Care and Haven, there’s little track record for success.”
An aspect of One Medical that Amazon may benefit from as it continues to build out its health care services are the partnerships One Medical has with some of the nation’s largest health systems. One Medical developed the relationships in order to have medical specialists affiliated with the health systems provide care at its clinics. Amazon might be able to expand upon those partnerships — or at the very least, learn from them.
Becker’s Hospital Review interviewed chief digital and innovation officers at several health systems about the acquisition, and the overall impression was positive.
“It will be a good thing for consumers over time,” said Mike Anderes, chief digital officer of Froedtert Health. “The combination of Amazon’s scale and One Medical’s consumer-friendly model will be a good fit for some people. While there is no perfect one-size-fits-all primary care model, this combination will drive all primary care models to improve.”
“Amazon understands their consumer and how to create highly efficient, customized, and frictionless experiences. They see an opportunity to bring that to health care,” said Eric Smith, chief digital officer at Memorial Hermann Health System. “As health systems, we need to continue to push ourselves to do the same: work to provide the most seamless, personalized, and convenient experiences possible, that are also still deeply caring and compassionate.”
“As an industry we must embrace alternative payment models, figuring out how to do more with less, and providing even better multimodal care than we traditionally have been,” said Aaron Miri, chief digital and information officer at Baptist Health in Jacksonville, Fla. “This marriage [between Amazon and One Medical], assuming success, which I always hope for, should be yet another proof point that the way we have always delivered and reimbursed for care isn’t going to be the way that we will do it in the future.”
UnitedHealth may own Change Healthcare, but Amazon is doing its best to actually change health care.
Humana will be phasing out its employer insurance business over the next 18 to 24 months. A strategic review revealed that the company’s employer group commercial medical products business “was no longer positioned to sustainably meet the needs of commercial members over the long term” or support Humana’s long-term strategic plans, according to a news release. CEO Bruce Broussard said the decision will enable Humana to focus its resources on the best opportunities for growth. “It is in line with the company’s strategy to focus our health plan offerings primarily on government-funded programs (Medicare, Medicaid, and military) and specialty businesses, while advancing our leadership position in integrated value-based care and expanding our CenterWell health care services capabilities,” he said. In 2021, Humana’s employer insurance business generated slightly less than $7 billion, which was less than 10% of the company’s total revenue ($83 billion) for the year, Reuters reported.
Eisai and Biogen’s Leqembi (lecanemab) will be subject to the same coverage limitations CMS imposed on the drug’s predecessor, Aduhelm (aducanumab). CMS said in a statement released on Wednesday that it would not reconsider its final national coverage determination for FDA-approved monoclonal antibodies directed against amyloid for the treatment of Alzheimer’s disease, despite a request from the Alzheimer’s Association. “We recognize that these medications are a unique, new class of drugs, and we regret that the decision could not be more favorable,” the agency said, noting that there “is not yet evidence meeting the criteria for reconsideration.” CMS said it would “expeditiously review any new evidence … that could lead to a reconsideration.” Leqembi received accelerated approval last month for patients in the early stages of Alzheimer’s disease; if the drug is granted traditional FDA approval, which Eisai and Biogen anticipate happening this year, CMS will provide broader coverage based on a framework announced last April.
Teladoc Health reported a loss of $13.7 billion for 2022, largely due to impairment charges related to the 2020 acquisition of Livongo, a chronic care company, for $18.5 billion. Teladoc recorded a $6.6 billion non-cash goodwill impairment charge in the first quarter of 2022 and another impairment charge of $3 billion in the second quarter. The total impairment charge reported for the full year was $13.4 billion. The Purchase, N.Y.-based virtual care company reported 15% growth in revenue for the fourth quarter, at $638 million, and 18% growth in revenue for the full year, at $2.4 billion. Teladoc’s BetterHelp direct-to-consumer mental health segment was the primary driver of revenue growth. An analyst with SVB Securities said Teladoc’s 2023 guidance “marks a reset to achievability” with “a healthy level of macro conservatism baked into the outlook.”
Mark Cuban Cost Plus Drug Company is collaborating with Diathrive Health, a Salt Lake City-based company with a diabetes management platform that offers members access to unlimited glucose testing supplies, along with personalized coaching and care plans. Members can connect with certified nurses and clinicians, and use Diathrive Health’s app to track their health data. The collaboration between the two companies will focus on “improving health care access, lowering costs, and improving outcomes for people living with diabetes and other chronic diseases,” the announcement stated.
Separately, the company tweeted about a new partnership with independent pharmacists to increase access to, and affordability of, prescription drugs. Mark Cuban told Becker’s Hospital Review that more information about the partnership program is forthcoming “sometime next month.”
Billings Clinic and Logan Health have signed a letter of intent (LOI) to explore combining the two not-for-profit health systems. While the LOI is nonbinding, the Montana-based health systems said in a press release they expect to arrive at a definitive agreement this spring and have details and approvals finalized potentially by summer. Billings Clinic is Montana’s largest independent health system, affiliated with 18 hospitals and clinics across Montana and Wyoming. It has nearly 600 physicians and advanced practitioners. Logan Health has six hospitals and more than 68 provider clinics, with a total service area that covers 20 counties.
Rob Hitchcock is the new president and CEO of SelectHealth, the nonprofit health plan affiliated with Intermountain Health. Hitchcock has served in both capacities on an interim basis since November. Before joining SelectHealth last August, he was the chief operating officer at Carelon, Elevance Health’s payer-agnostic health care services subsidiary. He also previously held executive roles at Centene, Blue Cross Blue Shield, and Humana, according to a press release.
What we’re reading
‘What is the best hospital in the US?’ ChatGPT’s response. Becker’s Hospital Review, 2.20.23Health Care Affordability: Iron Triangle Or Iron Curtain? Health Affairs Forefront, 2.16.23
Vicious and Virtuous Cycles in Health. JAMA Forum, 2.23.23
