The U.S. Department of Justice (DOJ) recently filed a lawsuit to block UnitedHealth Group Incorporated’s UNH $3.3 billion acquisition of Amedisys, Inc. AMED, arguing that the merger would hurt competition in the home health and hospice care market.
According to the DOJ, merging UnitedHealth’s Optum unit, a major provider in this sector, with Amedisys could limit patient choices and reduce competitive pay for nurses. It is also expected to decrease options for insurers. This reduced competition might lead to higher costs and limited access to affordable home health care for seniors.
Per Bloomberg, attorneys general from four states — Maryland, Illinois, New Jersey, and New York — have joined the DOJ's complaint. Last year, UnitedHealth acquired LHC Group for $5.4 billion, another large home health provider, increasing its influence in this sector. The DOJ suggests that UnitedHealth’s acquisitions reflect a strategy of buying competitors rather than competing directly, potentially giving it control over multiple markets.
However, UnitedHealth’s Optum division expects that the acquisition would foster industry innovation and improve value-based care for patients. Optum has committed to “vigorously defend” the acquisition and proposed to sell some care centers to VitalCaring Group’s affiliate VCG Luna, a home health provider, to address competition concerns. But the DOJ considers these proposed divestitures insufficient to resolve the potential harm.
Optum's expertise in value-based care, combined with Amedisys' focus on home-based care and quality innovation, was anticipated to enhance health outcomes, lower costs, and improve patient care continuity. Over the years, Optum has made strategic acquisitions to strengthen its market position and expand its capabilities. This business segment plays a key role in UnitedHealth's broader diversification strategy.
UNH’s Price Performance
UnitedHealth shares have gained 13.2% in the past year compared with the industry’s 9.4% growth.
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UNH’s Zacks Rank & Key Picks
UnitedHealth currently has a Zacks Rank #3 (Hold).
Some better-ranked and promising stocks in the broader Medical sector are Tenet Healthcare Corporation THC and CareDx, Inc CDNA. While Tenet Healthcare currently sports a Zacks Rank #1 (Strong Buy), CareDx carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tenet Healthcare’s 2024 bottom line suggests 63.2% year-over-year growth. THC has witnessed four upward estimate revisions over the past 30 days against no movement in the opposite direction. It beat earnings estimates in all four quarters, with an average surprise of 59.9%.
The Zacks Consensus Estimate for CareDx’s current-year earnings indicates a 162.5% year-over-year improvement. CDNA beat earnings estimates in each of the past four quarters, with an average surprise of 135.2%. The consensus mark for revenues suggests 17.5% growth from the year-ago period.
The Zacks Consensus Estimate for Encompass Health’s 2024 full-year earnings implies a 17.6% increase from the year-ago reported figure. EHC beat earnings estimates in each of the last four quarters, with an average surprise of 13.6%. The consensus mark for its current-year revenues is pegged at $5.34 billion, which indicates an 11.3% year-over-year increase.
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