UnitedHealth's Optum to buy DaVita clinics for $4.9B
- UnitedHealth's service and innovation arm Optum announced Wednesday it will acquire DaVita Medical Group for $4.9 billion.
- DaVita Medical Group — which serves about 1.7 million patients per year through nearly 300 medical clinics featuring primary and specialist care — will become part of Optum’s OptumCare division.
- The transaction is expected to close next year.
UnitedHealth Group's health services company is set to add another acquisition to its trophy room. As Optum continues to build out primary and outpatient services, CVS Health and Aetna struck a $69 billion deal to compete against Optum's growing market share (though some think the merger was inspired by Amazon).
Optum has been on a shopping spree this year. The business made deals to buy the healthcare side of the Advisory Board Company for $2.58 billion, ambulatory surgery center chain Surgical Care Affiliates for $2.3 billion and Reliant Medical Group in Massachusetts.
With medical groups in California, Colorado, Florida, Nevada, New Mexico and Washington, the DaVita purchase will expand the market reach of Optum’s strategic care delivery portfolio which also includes Surgical Care Affiliates, MedExpress and HouseCalls.
Meanwhile, the company’s subsidiary Optum, which was the biggest highlight of its second-quarter earnings, also saw revenue growth in the third quarter. Optum’s revenues increased by 8% year-over-year to $22.9 billion, and earnings from operations grew 16%. The company served about 90 million customers in Q3, 9 million more than the previous year.
The CVS-Aetna deal and Optum's recent acquisitions are the latest examples of an industry in flux, moving toward decentralization. This leads to some very important questions. For example, if a consultant company or medical service group is owned by a parent insurance company, where does a business allegiance lie?
Yikes?! If my doctor works for the insurer, whose side is he on? Docs take an oath to protect patients, not the bottom line. https://t.co/l1HuEzr9yo— Elisabeth Rosenthal (@RosenthalHealth) December 6, 2017
In addition, the clear incentives for vertical industry integration are ushering in new questions over what exactly is a monopoly in the healthcare space. While CVS and Aetna do not have many overlapping customers, high touch points across various healthcare service lines could be jarring to customers. The Optum-DaVita deal, and Optum's other deals, could raise the same flags for alarm.
And the vertical integration merry-go-round picks up UHC & DaVita medical group ... methinks regulators need new paradigm for analyzing these deals. CVS/Aetna and UHC/DaVita pass antitrust vertical integration analysis, but insurer mergers didn't pass horizontal integr analysis. pic.twitter.com/eTokwRKshX— David Harlow (@healthblawg) December 6, 2017
The evidence is still out on whether consumers will save money from these deals, but this will be a storyline the industry — and regulators — will watch in great detail going forward.
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