UnitedHealth Deal Adds Doctors -- WSJ
December 07 2017 - 3:02AM
Dow Jones News
Company to pay $4.9 billion to buy kidney-care firm DaVita's
physicians group
By Anna Wilde Mathews
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 7, 2017).
UnitedHealth Group Inc. will buy DaVita Inc.'s physician group
for about $4.9 billion in cash, in the latest sign of how the
parent of the biggest U.S. insurer is rapidly expanding its role as
a health-care provider.
UnitedHealth's deal for one of the nation's biggest doctor
groups, coming the same week as pharmacy giant CVS Health Corp.
sealed its $69 billion deal to buy insurer Aetna Inc., underscores
how health-care companies are forging deeper into segments outside
their traditional core businesses. The CVS combination would unite
drugstores, a pharmacy-benefit manager and insurance to build an
integrated health care company without a foundation of doctors.
That deal stands in contrast to the UnitedHealth mix, which
involves a PBM in addition to health coverage and, now
increasingly, physicians.
Kidney-care provider DaVita had previously said that it was
"pursuing strategic alternatives" for its physician operation,
which has had bumpy financial results and recently surprised
investors by driving down earnings for DaVita, which recorded a net
loss in the third quarter.
UnitedHealth's Optum health-services arm has been building up
its roster of physician practices, clinics and surgery centers with
years of mostly under-the-radar acquisitions, but DaVita's group
represents its highest-profile deal so far in the doctor
business.
Larry C. Renfro, the chief executive of Optum, said the
acquisition "advances our shared goal of supporting physicians in
delivering exceptional patient care in innovative and efficient
ways."
DaVita Medical Group includes around 280 clinics offering
primary and specialist care, as well as 35 urgent-care centers and
six outpatient surgery centers. It operates in states including
California, Washington and Florida. The group employs around 2,200
health-care providers, including doctors, nurse practitioners and
physician assistants.
Earlier this year, Optum closed its $2.3 billion acquisition of
Surgical Care Affiliates Inc., a major surgical company. Optum also
last month took over the health unit of Advisory Board Co., which
advises hospital systems.
UnitedHealth has said Optum aims to provide primary care and
ambulatory services in 75 markets, representing about two-thirds of
the U.S. population. Last month, the company told investors that it
has medical groups in 30 markets, and a health-care provider
presence in 60.
DaVita bought the big medical group HealthCare Partners LLC in
2012 in a $4.42 billion deal that diversified it away from its core
kidney-care business. At the time, HealthCare Partners was the
largest U.S. operator of physician groups and networks. DaVita
later expanded it.
But the company has struggled with the physician operation.
DaVita attributed the unit's third-quarter result to
higher-than-projected medical costs and other factors. At the same
time, DaVita has been under pressure in its main business because
of scrutiny on the relationship of it and other kidney-care
providers to a charity, American Kidney Fund, that has helped
patients pay for health coverage.
DaVita said it would use the proceeds from the deal with Optum
for stock buybacks, debt repayment and other purposes. The
companies said the deal was expected to close in 2018.
Warren Buffett's Berkshire Hathaway Inc. is the parent company's
top shareholder and held about one-fifth of DaVita shares as of
Sept. 30. Berkshire portfolio manager Ted Weschler initiated the
position after joining Berkshire in 2011.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
December 07, 2017 02:47 ET (07:47 GMT)
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