The Good Brigade
A Raymond James analyst is warning that a just proposed 6.4% cut in Medicare payments to home health care agencies in 2026 introduced by the Trump administration could be a “death knell” for UnitedHealth Group’s (NYSE:UNH) planned acquisition of Amedisys (NASDAQ:AMED).
That deal, worth ~$3.3B, has already had a rocky road to completion as the Department of Justice has voiced opposition unless remedies are made.
The 6.4% cut in 2026 equates to ~$1.1B.
Out of the 6.4%, ~4% of that is to account for Medicare’s move to ramp up a value-based payment model known as Patient-Driven Groupings Model in which payments are based on patient characteristics and care needs, instead of the number of therapy services provided.
In addition, the administration’s proposal includes a separate payment cut of 5%. CMS stated this is to recoup retrospective overpayments from 2020 through 2024.
“While AMED has worked through prior rate updates relatively well, this update is orders of magnitude worse than previous years,” Raymond James John Ransom, who rates Amedisys at market perform, wrote.
He added that while a final rule is usually not as severe as a proposed rule, the cut for 2026 is “by far the deepest cut yet.”
“We wonder if this could mean the AMED/UNH deal is off given it has faced a two-year legal battle with the Department of Justice, and the deal is currently set to go to mediation in August. We wonder if UNH would be willing to walk away given their current situation and to avoid more heartache with regulators.”
RBC Capital Markets’ Ben Hendrix projects significant pushback to the rule “and renewed legislative efforts later this year to address the disparity between CMS and industry budget neutrality expectations.”
Enhabit (NYSE:EHAB) is so far the hardest-hit home health stock, down ~18% in Tuesday morning trading. Pennant Group (NASDAQ:PNTG), BrightSpring Health Services (NASDAQ:BTSG), and Aveanna Healthcare (NASDAQ:AVAH) are also off significantly.