UnitedHealth : Deal Adds Doctors -- WSJ
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 [email protected]