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December 6, 2017

UnitedHealth Group to acquire DaVita's physician group for $4.9B

Daily Briefing

    UnitedHealth Group's Optum plans to acquire DaVita Inc.'s physician group for about $4.9 billion in cash, the companies announced Wednesday.

    Tomorrow at 1 pm ET: How to engage your physicians from Day One

    The companies expect the deal, which is subject to regulatory approval, to close in 2018.

    According to the New York Times, the deal comes as stakeholders in the health care industry seek out new partnerships "to deliver care in novel ways, outside the expensive setting of a hospital." Earlier this week, for instance, CVS announced plans to acquire health insurer Aetna for $69 billion, a move aimed at converting drugstores into community health care "hubs," according to the New York Times.

    About the acquisition

    Under the arrangement, DaVita Medical Group would become part of Optum's OptumCare division, a network of about 30,000 affiliated physicians who provide care to millions of patients a year, Optum said.

    DaVita Medical Group includes about 280 clinics, 35 urgent care facilities, and six outpatient surgery centers across six states, including California, Florida, and Washington. The company, which employs about 2,200 health care providers, serves an estimated 1.7 million patients per year.

    According to the Denver Post, DaVita plans to use the cash it receives in the deal to purchase back stock over the next one to two years, repay debt, and meet other corporate expenses.

    Optum earlier this year closed a $2.3 billion acquisition of Surgical Care Affiliates, a large surgical company. Last month it also closed on a deal to purchase Advisory Board, which publishes the Daily Briefing.

    What comes next

    Optum CEO Larry Renfro said the DaVita Medical Group acquisition "advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways."

    DaVita CEO Kent Thiry said after the deal, DaVita "will continue to be a leader in population health management, with a focus on [its] U.S. and international kidney care businesses."

    Optum ultimately aims to provide primary care and ambulatory services in 75 markets, according to UnitedHealth Group. The company last month told investors it has medical groups in 30 markets and a provider presence in 60, the Wall Street Journal reports (Wilde Mathews, Wall Street Journal, 12/6; Abelson, New York Times, 12/6; Rubino, Denver Post, 12/6).

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