Comment on FTC Draft Merger Guidelines

September 21, 2023

These comments were submitted to the Federal Trade Commission on September 14, 2023 regarding proposed merger guidelines.

I am Dr. Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research (CEPR) and co-author of the 2014 book, Private Equity at Work: When Wall Street Manages Main Street. On behalf of myself and my coauthor, Cornell University professor Rosemary Batt, I am pleased to submit these comments. Professor Batt and I have studied the financialization of the U.S. economy for more than a decade. Most recently, our research has focused on the role of financial actors in health care.

CEPR welcomes the proposed merger guidelines put forward by the FTC and the DOJ. Research we have conducted finds that, absent these guidelines, mergers in healthcare have consolidated core parts of that industry, including doctors’ practices, hospices, and home health agencies. Private equity (PE) firms have played a major role in industry consolidation, but they are not the only financial players in healthcare, Health insurance giants are also major drivers of consolidation. Private equity and insurance giants are profit-driven, not mission driven, and their unfettered entrance into core healthcare delivery segments has raised costs to patients and/or taxpayers and has provided incentives to providers to reduce access to care and/or reduce the quality of the care provided. Smaller competitors – independent and nonprofit providers – have increasingly been absorbed into the large for-profit enterprises or driven out of business.

Physicians’ Practices

The consolidation of doctors’ practices is well-known. Two of the largest PE firms- KKR and Blackstone – own the two largest firms that supply emergency department physicians to hospitals, Envision and Team Health. Both were highly profitable and were promoted as examples of PE’s secret sauce for improving efficiency and reducing costs. But it turned out that the secret sauce was charging patients high out-of-network fees and saddling families with medical debt that many could not afford to pay, in the case of Envision; or in the case of TeamHealth, threatening to do so in order to garner high, in-network reimbursements that raise insurance premiums. When Congress passed legislation banning surprise medical bills to patients, both companies were in deep financial trouble. Envision is bankrupt and the IRAs and pension funds holding the company’s massive debt have taken huge financial losses. TeamHealth is in negotiations with its lenders to restructure its debt in the hopes of avoiding a similar outcome.

Hospice Care

Less well-known is the case of hospice care, a benefit available to Medicare beneficiaries and paid for by the Centers for Medicare and Medicaid Services (CMS). Private equity firms have rapidly moved into this healthcare segment and consolidated small hospice providers into mega-chains that now dominate many local markets, including rural areas. CMS’ capitated payment rules can potentially be exploited by profit-driven hospice providers to maximize profit. Strategies for gaming the CMS payment system include fraudulently enrolling individuals with more than six months to live. They also cherry-pick the patient population so it includes more dementia patients who tend to live longer and are less costly to care for, while accepting fewer cancer patients, who die more quickly and require costly care by an RN. Another strategy is to schedule fewer visits by clinical staff to the dying patient, including no visits at all in the final week of life when care is most urgently needed. Patients and their families can request in the care plan that care should meet reasonable standards of clinical care and patient visits, but the hospice provider can refuse. The patient and caregiver may have few other local agencies to turn to that are not owned by private equity, due to horizontal consolidation in local health markets. There may be spillovers of this bad behavior from PE-owned providers to other hospice agencies. Our report, Preying on the Dying: Private Equity Gets Rich in Hospice, unravels the acquisitions by what is now the largest hospice company in the U.S. Links to articles cited below are in the report.

Untangling the Kindred at Home Acquisitions Timeline

In December 2017, insurance company Humana and private equity firms TPG and Welsh, Carson, Anderson & Stowe (WCA&S) acquired Kindred at Home, the largest provider of home care and hospice services in the U.S. Humana held a minority stake in the acquired company (Pifer 2021). At the time of sale, Kindred Healthcare – the parent company of Kindred at Home – was one of the largest providers of post-acute and senior care in the U.S. Its Kindred at Home division was the single largest U.S. home health company and second largest hospice provider in the country, with more than 600 home health and hospice sites and about 40,000 caregivers, generating annual revenue of approximately $2.5 billion (Mullaney 2018; Donlan 2021a). In 2017, a year before being purchased by Humana and the two private equity firms, Kindred at Home reported more than $740 million in revenue for its hospice business alone, and operated at 178 hospice sites nationwide, admitting nearly 51,000 patients who stayed an average of 96 days for a total of 4.9 million hospice patient days (Kindred Healthcare 2017).

Kindred Healthcare was seeking a buyer because it faced a huge debt load generated by its buying spree of long-term care facilities and home health and hospice providers. Its debt was becoming unmanageable and the company faced challenging industry conditions, as well as uncertainty regarding Medicare and Medicaid funding. Kindred Healthcare had already sold off its nursing homes and used the proceeds to pay down some of the debt (Li 2018). On Humana’s side, controlling more of the care continuum offered an opportunity to better manage costs and outcomes for its large Medicare Advantage beneficiary population. The fixed payments from Medicare for patients enrolled in hospice, and the lower costs associated with home care, as compared with hospital care, for the patients it insures, made the deal attractive to Humana (Li 2018; Mullaney 2018a). Prior to the acquisition of Kindred Healthcare, Humana had experience with home health and hospice via joint ventures with other providers. Humana applied its expertise from the insurance side of the industry to the providers’ operations to improve patient experience and control care costs (Larson 2018).

Under stipulations included in the deal, Kindred Healthcare was split into two businesses: Kindred at Home (home health, hospice, personal services/care) and Kindred Healthcare (acute care, long-term care and rehabilitation hospitals). TPG Capital and WCA&S attained 100 percent ownership of Kindred Healthcare’s hospitals and clinics, which they sold in June 2021 to Apollo-owned LifePoint.

PE firms TPG and WCA&S held a 60 percent stake in Kindred at Home; Humana held the remaining 40 percent. Just a few months after the acquisition of Kindred at Home, in July 2018, Humana and its private equity partners TPG and WCA&S acquired Curo Health Services, a provider of hospice services based in Mooresville, North Carolina, from PE firm Thomas H. Lee Partners through a $1.4 million leveraged buyout. Curo, with 245 locations in 22 states, was merged with Kindred at Home, further enlarging the latter’s foot print in home health and hospice (Japsen 2018). Three years later, in June 2021, Humana acquired home-based services provider One Homecare Solutions from WayPoint Capital Partners, the private equity arm of a family office (Pifer 2021).

In April 2021 Humana agreed to acquire the remaining 60 percent of Kindred at Home from TPG Capital and WCA&S for $5.7 billion, valuing the company at $8.1 billion, including Humana’s $2.4 billion equity value in the company (Parker 2021a). In March 2022, Humana rebranded Kindred at Home as CenterWell Home Health – a company it launched with the goal of uniting most of its healthcare service businesses under one brand (Lagasse 2022). Just a few months later, however, in August 2022, Humana split CenterWell into two companies, a home health company and a hospice and personal care business. Humana then divested a majority stake in CenterWell’s hospice and personal care business to PE firm Clayton, Dubilier & Rice (CD&R), retaining a minority interest in the company (Business Wire 2022; Humana 2022). The deal did not include the Curo Health Services hospice agencies, which Humana continued to own. The newly standalone hospice and personal care company, owned by CD&R and Humana, took the name of one of its subsidiaries and was rebranded as Gentiva. All subsidiaries that had been acquired by Humana, including Curo, were also rebranded as Gentiva.

The Gentiva chain, owned by Humana and its PE partner CD&R, further expanded its network on February 27, 2023 when it announced plans to acquire nonprofit ProMedica’s Heartland home health and hospice assets for $710 million. The deal will increase Gentiva’s number of locations from 380 to 500 and its patient census from about 25,000 to 34,000 across 36 states (Donlan 2023; Parker 2023). This does not include the more than 200 Curo locations now also branded as Gentiva and wholly owned by Humana.

Some of the subsidiaries acquired by Humana and its PE partners had a history of bad behavior that defrauded Medicare and put patients at risk. We document this in our case study of Curo Health Services. The bad behavior of some Curo hospice agencies did not disappear after Curo was acquired by Humana and its PE partners; rather, the bad behavior became more sophisticated and difficult to detect. In June 2021, a whistleblower suit alleged that Curo Health Services, among other hospice providers in Tennessee, helped themselves to a portion of the money available from government programs for hospice care by falsely certifying that patients’ illnesses had reached a terminal stage, when, in fact, they had not. These allegations fell under violations of the federal False Claims Act, as well as Tennessee state laws. That year, Kindred at Home’s relationship with PE firms TPG and WCA&S came under scrutiny by the U.S. Senate Finance Committee, which was concerned about the quality of hospice care provided by the company as well as by the surge in private equity investments in health services since 2010 (United States Senate Committee on Finance 2021; Parker 2021b). Senators Wyden, Brown, and Warren, who sit on the Committee, sent a letter requesting information about their operations to Humana, TPG and WCA&S (“Letter to President and Chief Executive Officer of Kindred at Home” 2021).

Home Health Care

Our soon-to-be published report, Pocketing Money Meant for Seniors: The Financialization of Home Health Care (pdf available on request), includes an analysis of the vertical integration strategies of the three insurance companies with the most enrollees in Medicare Advantage plans – UnitedHealth Group (UHG), Humana, and CVS/Aetna. The insurers not only own Medicare Advantage Plans, they own the risk assessment companies that evaluate plan participants to see how ill they are. CMS pays more for sicker participants that are at high risk of needing more expensive care. They own home health agencies that provide home services for eligible Medicare beneficiaries. The insurers are driving the consolidation of the home health industry and destroying competition. Even the largest home health chains see a need to be acquired by an insurer with MA plans in order to be viable in the future. And they own and have consolidated Pharmacy Benefit Managers (PBMs). Vertical integration provides opportunities for transfer pricing–when the PBM sells pharmaceutical products to the MA plan. These are internal prices, not market-set prices. The MA plan has an incentive to pay a high price with a large margin over cost. The expenditure will count as spending on patient care and help the MA plan meet its Medical Loss Ratio (MLR) – the requirement that it has to spend 85 percent of premiums on patient care and limits profit and administrative costs to 15 percent. The PBM, and the insurer that owns it, will pocket the excessive profit, and will not be constrained by the MLR since it is the MA plan and not they who are the care providers. The profit on the pharmaceutical products counts as patient care even though the patient gets no benefit. Here is an excerpt from that report that looks at vertical integration at UHG with an emphasis on how its strategy has consolidated the home health market:

UHG, Humana, and CVS/Aetna share several things in common. They each have a large captive clientele of millions of enrollees in their MA plans and have adopted a diversification strategy that enables them to require their MA members to use a variety of home-based services provided by other companies they also own.

In addition to owning home health and home care companies, their vertical integration strategies include other parts of the home health supply chain – in particular, the acquisition of risk assessment (RA) companies and pharmacy benefits managers (PBMs). As we discuss below, these acquisitions increase the profits of the insurers that own home MA plans. Using insurer-owned risk assessment vendors facilitates upcoding by the MA plan that exaggerates the seriousness of the enrollee’s health status and higher capitated MA payments. There is a second way that insurance companies profit from owning subsidiaries that engage in transactions with each other. When the MA plan purchases services from a supplier that is also a subsidiary of the insurance company that owns the plan, the transaction is not a market transaction, and the price of the service is not set in a market. Economists refer to these internally set prices as transfer prices and they loom large in the case of PBMs. Internal transfer pricing can be used to boost insurance company profits, as described below. In sum, insurers’ growing market power combined with the size and scale of their MA plans has boosted the insurers’ earnings by billions of dollars without an increase in the quantity or quality of patient care.

UnitedHealth Group entered the home health care market in January 2023, when it finalized its purchase of the for-profit home health company LHC Group for $5.4 billion. [This was just shortly after LHC Group’s CEO had touted the company’s success as an independent home health provider.] UnitedHealth Group CEO, Andrew Witty, explained his company’s interest in home health providers, “It’s no secret that we believe that home health capabilities, when combined with other activities in terms of wrapping care around patients, is a really important element of the future of value-based care” (Filbin 2023c). Half a year later, in June 2023, UnitedHealth Group’s Optum made a successful, all-cash bid for Amedisys that values the company at roughly $3.3 billion. Amedisys provides a range of services that includes home health, hospice, and — since its acquisition of Contessa – hospital-at-home services. Amedisys operates 522 locations across 37 states and the District of Columbia (Holly 2023). LHC operates a similar number of locations. A combination of the two under UnitedHealth Group’s roof will likely create the largest vertically integrated provider in the U.S. of health services in the home. The home health business alone of the combined company will surpass Humana’s CenterWell as the largest U.S. provider with about 10 percent of the home health market (Famakinwa 2023b). The deal is not yet finalized; the acquisition of Amedisys still faces regulatory review by the Federal Trade Commission (FTC).

If the deal is finalized, however, Optum would be the leading home-based health provider in the country, capturing about 10% of the market (Holly 2023). The combined LHC-Amedisys footprint would exceed the next largest competitor, Humana’s CenterWell Home Health – formerly Kindred at Home (Holly 2021). They would also be well-positioned to offer a continuum of home-based care, including home health, hospice, personal care (from LHC’s operations), and high-acuity care through Contessa Health (a subsidiary of Amedisys as of 2021) (Famakinwa 2023b).

As of August 2023, the deal was not yet finalized. On August 10th, the Department of Justice issued a second request to Amedisys for more information. This does not necessarily derail the deal, but it pushes back the date of the possible merger. The deal had been expected to face antitrust scrutiny in spite of the fact that there is little geographic overlap between Amedisys and LHC Group, the other home health business UnitedHealth Group acquired earlier in 2023 (Pifer 2023e).

Amedisys is a home health, hospice, and personal care agency that had its beginning in Baton Rouge, LA in 1994 as a public company. Between 1998 and 2022, Amedisys grew into a diversified home health agency. It acquired 50 home health and hospice companies, attracted interest and funding from private equity firms, and positioned itself to provide a wide variety of home-based services for the elderly. As one of the largest home health agencies, Amedisys seemed capable of remaining independent and partnering with Medicare Advantage plans to provide in-home services for their members. But its acquisition by UnitedHealth Group’s Optum in August 2023 followed closely behind the 2023 acquisition of another major home health provider, LHC Group (Pitchbook Amedisys Profile 2023).

Amedisys’ first major acquisition was Beacon Hospice in 2011 for $126 million (Pitchbook Amedisys Profile 2023). Beacon had 3 free-standing locations, one inpatient unit, and saw a daily patient count of 1,300 on average. The Optum deal would boost the number of hospice patients under its care by about 40% and would complement its home health business with “many of its hospice locations matching the market presence of its existing home health care centers” (FoxBusiness 2015). Private equity firm Kohlberg Kravis Roberts (KKR) saw Amedisys’s growth and provided development capital to the company in August 2013, taking an 8.50 percent stake in the company (Pitchbook Amedisys Profile 2023).
In May 2014, Amedisys settled a False Claims Act Lawsuit for $150 Million. Seven whistleblower (qui tam) lawsuits alleged that Amedisys made False Claims to Medicare for ineligible home health care services and patients between 2008 and 2010 (Waters Kraus & Paul Law Firm 2014; DOJ 2014). According to the Department of Justice, Amedisys allegedly billed Medicare for nursing and therapy services that were medically unnecessary or provided to patients who were not homebound, and otherwise misrepresented patients’ conditions to increase its Medicare payments. This was a result of management pressure on nurses and therapists to provide care based on the financial benefits to the company rather than the needs of patients (DOJ 2014).

Amedisys also violated the Anti-Kickback Statute by providing patient care coordination services at below-market prices to a private oncology practice in Georgia.
In 2019 and 2020, Amedisys acquired three more hospice organizations: Compassionate Care Hospice for $340 million which brought its patient census from 7,200 patients in 22 states to 11,000 patients in 33 states (Pitchbook Amedisys Profile 2023; Parker 2019); Asana Hospice for $66.30 million; and AseraCare Hospice for $230.0 million (Pitchbook Amedisys Profile 2023; Parker 2020).

In 2021, Amedisys acquired a home health and hospice care business, Visiting Nurse Association, for $20.1 million (Muoio 2021) and a home health care and hospital-at-home provider, Contessa, for $240.7 million. In the company’s words, taking on Contessa would bring “tech-enabled, higher-acuity hospital at home and skilled-nursing facility at home services, advanced claims analytics platform, network management and additional risk-taking capabilities to Amedisys’ range of home-based services” (Amedisys 2021; Parker 2021). In August 2022, Mount Sinai Health System and Amedisys-owned company, Contessa, partnered to create Mount Sinai at Home, a home-based care continuum that “includes home health, hospitalization at home, rehabilitation at home (in lieu of care at a skilled nursing facility) and palliative care at home” (Mount Sinai Health System 2022).

In April 2022, Amedisys acquired Evolution Health, a provider of home health services based in Dallas, Texas, for $67.8 million (Donlan 2022a). Evolution is a division of Envision Healthcare, a private equity-owned company with a long track record of loading patients with surprise medical bills. It has since filed for bankruptcy (Appelbaum 2023). Evolution brought 3,300 home health patients and 650 employees across 15 locations in Texas, Oklahoma, and Ohio to Amedisys. This deal was notable for two reasons: it marked a transition for Amedisys from hospice acquisitions to home health acquisitions, and it expanded Amedisys’s access to Medicare and Medicare Advantage enrollees. For UHG, the acquisition of Amedisys will cement Optum’s dominant position in home health and expand its reach across the continuum of care.


The new merger guidelines would subject the serial horizontal mergers of hospice agencies that individually do not meet the HSR threshold for review by antitrust agencies of their effects on competition. Vertical mergers, like those pursued by huge insurance companies that own MA plans would be discouraged on a number of grounds in the proposed merger guidelines. This would benefit patients, whose care would be improved, as well as the working people who fund Medicare through their payroll taxes. Competition and a level playing field would lead to lower prices, competition on the basis of higher quality, and would relieve the pressure on the Medicare HI Trust Fund. CEPR supports the proposed merger guidelines.

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