Battle to Dominate At-Home Care Could Shape Senior Living Market and Brookdale’s Future

I recently wrote about the senior living implications of Option Care’s planned acquisition of home health giant Amedisys (Nasdaq: AMED). The situation became even more interesting last week, with UnitedHealth Group’s Optum arm making an all-cash play for Amedisys.This news makes it more evident than ever that senior living providers must have business strategies that take into account how the home health care landscape is being reshaped, largely by huge insurance companies that are battling for scale in the market.

These insurers certainly see senior living communities as homes for older adults, and I believe senior living providers will be drawn into the contest that is currently hottest in the home health and private duty sector, as the so-called “payviders” will seek to exert more control over how care and services are delivered in senior housing settings.

Acquiring a senior living provider outright is one way that an insurance company could gain that level of control, and to my mind, Optum hypothetically makes a logical suitor for Brookdale Senior Living (NYSE: BKD).

In this week’s exclusive, members-only SHN+ Update, I analyze this recent news and offer key takeaways, including:

• Why “payviders” are vying for market dominance in home care delivery
• How Brookdale already is intertwined with Optum’s home health business
• Brookdale’s HealthPlus model increases the company’s allure to players — and payers — in value-based care

Optum’s move for Amedisys

Optum’s bid values Amedisys at around $3.3 billion, and the all-cash nature of the proposal adds luster. Still, the deal might not come to fruition — the Option Care deal is still in play, with an offer that values Amedisys at about $3.6 billion, and there are potential concerns about regulatory complications related to an Optum acquisition.

Optum’s leaders are confident that a deal would pass muster with regulators because the home health market is so fragmented. If Optum acquires Amedisys, Optum will be the largest home health provider in the United States but would only own around 10% of the market — even after Optum last year acquired home health giant LHC Group (in a deal that drew FTC scrutiny).

Optum is seeking greater scale because the company’s leaders see home care as among the biggest frontiers in health care. They believe that shifting more care to the home will lower costs for insurance companies and the nation’s health care system as a whole and improve the consumer/patient experience, and home care is a cornerstone of UnitedHealth Group’s sustainability strategy.

“We view home health as one of the new frontiers of value-based health care because it improves access while providing a more convenient experience for people, like special needs patients and those in rural areas who often have a very difficult time leaving their home to get care,” Kristy Duffey, chief nursing officer at Optum Health and COO at Optum Home & Community Care, wrote in the recently released UnitedHealth Group 2022 Sustainability Report.

Many people residing in senior living communities also have a difficult time leaving their home to get care — a fact that I’m sure Optum’s leaders appreciate. UnitedHealth/Optum already has been a presence in the senior living sector for years. As far back as 2005, Erickson Living partnered with UnitedHealth to launch the Erickson Advantage Medicare Advantage plan, which as of 2019 was serving about 5,000 residents. More recently, Optum Senior Community Care VP Grant Severson spoke at the 2023 NIC Spring Conference, and Optum at Home Chief Medical Officer Kyle Kircher spoke at the 2023 Argentum conference in New Orleans.

So it stands to reason that as Optum’s leaders consider their moves in home-based care, they also are considering the population of patients living in senior living communities. Between 5% and 10% of Amedisys’ business was taking place in senior living communities as of late 2019, CEO Paul Kusserow estimated.

LHC Group also is providing care to many people living in senior living communities. Prior to its acquisition by Optum, LHC Group in 2021 acquired 23 home health locations owned by the joint venture of Brookdale and HCA Healthcare.

“LHC Group also looks forward to working with Brookdale Senior Living’s 226 senior living communities in these territories,” LHC Group CEO Keith Myers said at the time.

The confluence of Brookdale, Optum, LHC Group and now possibly Amedisys showcases the changing dynamics within the senior living and care continuum. Senior living providers must prepare for a future in which the home care market is dominated by “payviders,” given that UnitedHealth/Optum is not the only massive payer that is expanding its home care capabilities.

Following its acquisition by Humana (NYSE: HUM), Kindred Healthcare — the nation’s largest home care provider — has rebranded as CenterWell Home Health. If Optum acquires Amedisys, the three largest at-home care providers as of 2020 now would be part of insurance companies. And CVS Health (NYSE: CVS), which owns Aetna, also has repeatedly expressed interest in home health assets.

While the payers are obviously focused on acquiring home care providers at the moment, it might only be a matter of time before they set their sights on senior living providers. Senior living communities could become particularly attractive targets as more residents enroll in Medicare Advantage plans owned by mega-insurers in the years ahead.

According to data released in 2020, about 30% of assisted living residents and 31% of independent living residents are enrolled in MA, but those numbers are sure to increase as the overall Medicare Advantage population grows. Enrollment in MA increased 7.1% between 2022 and 2023, with total enrollment approaching 31.2 million people. And UnitedHealth and Humana accounted for two-thirds of new enrollees in 2023, according to a Stat analysis.

The time might not be ripe for an insurance company to acquire a senior living provider, but considering that Brookdale is reportedly considering a sale and is expanding a care model that should increase its value to MA payers, the possibility of Optum as a suitor is intriguing and I believe plausible.

Brookdale’s HealthPlus model

On Brookdale’s Q1 2023 earnings call, CEO Cindy Baier shared details about the company’s HealthPlus program, which she described as a “community-based, technology-enabled, proactive, care coordination” model.

“It works by providing each HealthPlus community with access to a registered nurse care manager who helps promote residents’ health and wellness,” she said. “These care managers use the latest technology and communication tools to enable responsive, effective care coordination with residents’ primary care providers, other specialists, and family members.”

HealthPlus has proven successful in its pilot phase, with a third-party analysis showing that residents in HealthPlus communities had fewer urgent care or emergency room visits and fewer hospitalizations than “similar residents in private housing.” Resident retention also has been higher in HealthPlus communities, translating to improved occupancy rates, while these communities also have had higher move-in rates and better associate retention.

The program recently expanded from 16 to 31 communities, with 18 more slated to be added this quarter.

Baier encouraged analysts to think about the program in relation to the “transition to value-based care,” noting that the HealthPlus results demonstrate that Brookdale is able to drive better outcomes and cost savings to the overall health care system.

“We’re still working on how we will capture more of that value for the Brookdale shareholders,” she said.

If Brookdale is considering an outright company sale, as reported by Bloomberg last fall, the HealthPlus results would help validate the enterprise’s value to an organization like Optum. Optum already has some control over home care delivery within Brookdale communities via LHC Group (and perhaps Amedisys as well, in the near future), and might see it as a natural extension to own the entire senior living platform, particularly if Optum sees an advantage in being able to influence the care and services being delivered to Medicare Advantage beneficiaries who are living in the communities but not receiving home health care services.

Before pursuing an acquisition, perhaps Optum or another payvider would prefer to see the HealthPlus model implemented across Brookdale’s portfolio and have further evidence of its effectiveness in driving value — but the pricetag for Brookdale might only go up, if the share price is buoyed by rising consumer demand and other factors in the coming quarters. As I write this, Brookdale is trading at $4.04 a share, while Optum bid for Amedisys at $100 a share.

The case for an Optum acquisition of Brookdale is a thought experiment at this point, but some senior living leaders for years have been predicting that a large insurer will one day acquire a senior living provider. I believe this day is drawing nearer, as the battle over home care heats up and senior living communities become prized territory to control.