UnitedHealth Is Among Suitors Of Tenet Business -- WSJ
July 19 2018 - 3:02AM
Dow Jones News
By Dana Mattioli and Melanie Evans
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 (July 19, 2018).
UnitedHealth Group Inc. is among suitors exploring an
acquisition of Tenet Healthcare Corp.'s health-care-management
subsidiary, according to people familiar with the matter, as the
industry giant pursues further expansion.
Tenet, one of the largest U.S. hospital companies, has said it
would weigh a sale of the unit, Conifer Health Solutions, which
provides services to hospitals and physician groups. Tenet said it
would make a decision in the first half of 2018 on Conifer, which
accounted for about 8% of its revenue last year.
It isn't clear whom the other suitors may be, and it isn't
guaranteed UnitedHealth or anyone else will ultimately strike a
deal for the business, which Tenet has said it may not sell.
Should there be a deal, it could value Conifer at $2 billion or
more, analysts have estimated.
Minnetonka, Minn.-based UnitedHealth has been an aggressive
acquirer in an industry undergoing a wave of consolidation.
Conifer, which generated $1.6 billion in revenue last year from
medical-billing and care-management services, would add to deals by
UnitedHealth to bolster its health-services arm, Optum.
Optum has built up one of the biggest pharmacy-benefit managers
and a huge array of doctor practices and surgery centers, as
UnitedHealth positions itself among companies looking to reshape
the U.S. health-care industry.
Conifer would come under a different segment of Optum's
business, which serves as a contractor and consultant to
health-care providers, particularly hospital systems. Earlier,
Optum bought the health-care business of the Advisory Board Co., an
adviser to hospital systems.
One potential complication for UnitedHealth: Some hospital
operators may be leery of working with Conifer if it becomes part
of Optum, whose surgery centers and clinics compete directly with
them in many markets. Also, UnitedHealth is the parent of the
biggest U.S. health insurer, UnitedHealthcare, which negotiates
prices with hospitals. UnitedHealth says it maintains a wall
between its insurance operations and Optum.
Tenet announced the possible divestiture in December, two months
after its longtime chief executive left the company as it grappled
with pressure from an activist investor. Tenet, like other hospital
owners, is also under pressure as more medical care moves to
less-costly clinics and ambulatory-surgery centers. Tenet has moved
to diversify away from hospitals with its acquisition of
ambulatory-center operator United Surgical Partners International
Inc.
Tenet has continued to restructure this year, announcing in
January it would expand previously announced job cuts to 2,000, or
about 2% of its workforce. Lately, Tenet's business has improved,
and its shares have more than doubled this year. The company said
Wednesday it reached a deal to sell three Chicago-area hospitals to
Pipeline Health LLC and TWG Partners LLC.
A Conifer sale would be a boon to its minority owner,
nonprofit-hospital system Catholic Health Initiatives, or CHI. The
Englewood, Colo.-based CHI owned roughly 24% of Conifer and
accounted for about 35% of its revenue at the end of last year,
Tenet securities filings show.
CHI last year said it reached a definitive agreement to merge
with Dignity Health, a San Francisco nonprofit-hospital system, to
create one of the largest U.S. health systems.
The merger, however, raised questions among analysts regarding
Conifer's long-term business with CHI. Dignity Health in 2013
formed a joint venture with Optum to create a medical-billing rival
to Conifer. A deal with UnitedHealth could allay such concerns.
Anna Wilde Mathews contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Melanie
Evans at Melanie.Evans@wsj.com
(END) Dow Jones Newswires
July 19, 2018 02:47 ET (06:47 GMT)
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