DaVita Medical Group operates nearly 300 clinics and half a dozen outpatient surgical centers in six states – Florida, California, Colorado, Washington, Nevada and New Mexico.
The DaVita facilities will become part of United’s Optum division, the umbrella for all of the noninsurance side of the business: pharmacy benefits, data analytics, consulting, clinics and surgical centers and home care.
“I am so proud of the DaVita Medical Group accomplishments, including our excellent clinical outcomes,” said Kent Thiry, DaVita chairman and CEO. “The combination of DaVita Medical Group and Optum should lead to even higher levels of performance.”
Yet, for DaVita, the medical group has significantly underperformed the company’s dialysis division. Last month, DMG posted a $5 million operating loss in the third quarter due to higher-than-expected medical costs, prompting the company to put the unit up for sale.
The DMG clinics would become part of Optum’s already large outpatient medical care footprint across 60 markets nationally. After completing an earlier $2.3 billion acquisition of Surgical Care Affiliates, the network includes 30,000 affiliated physicians, about 200 urgent care clinics and 200 outpatient surgery centers.
“We are in the marketplace. We are continuing to look at assets that make sense to us, but we have put together, what I’d call solid models in terms of how we view the organizations and how they fit,” Optum CEO Larry Renfro said last week at UnitedHealth’s analyst day in New York.
Optum’s integration of data analytics, pharmacy benefits and medical services has helped fueled UnitedHealth’s growth through acquisitions. The DaVita deal marks its fourth and largest transaction this year.
Others in the industry are now vying to take a page from the Optum playbook.
This week, pharmacy benefits firm CVS struck a $60 billion deal to buy Aetna in a bid to create a vertically integrated benefits and health-care system that would be anchored around CVS’ in-store clinics and pharmacies. The companies say together they can provide consumers with better-coordinated and more cost-effective care.
While CVS and Aetna have little overlap, the proposed merger could encounter some regulatory scrutiny because of the scale of the deal. Until now, that kind of health-care model has generally been used by hospital systems such as Geisinger Health and Kaiser Permanente.
DaVita said it plans to focus on its kidney care business and use the proceeds of the sale for “significant stock repurchases” following the close of the transaction.
Still, the company does not plan on being a stand-alone business for long in an environment where there’s pressure to provide greater value in health care.
“We also expect to pursue other investments in health-care services outside of kidney care,” Thiry said.