Kaiser Permanente Acquires Geisinger Well being in $5B Mega-Deal
In one of many largest healthcare offers to this point, Kaiser Permanente is buying Pennsylvania-based Geisinger Well being and investing $5 billion to fold it into a brand new nonprofit subsidiary referred to as Risant Well being, which is about to buy further medical teams in coming years.
Whereas regulators nonetheless should evaluation this preliminary acquisition, the wedding of Kaiser and Geisinger would create a behemoth with greater than $100 billion in annual income — 95% of it coming from the Kaiser facet of the equation.
Like Kaiser, Geisinger each owns hospitals — 10 of them — and operates its personal medical health insurance program. In contrast to California-based Kaiser, which operates a closed system of 39 hospitals and employs 24,000 medical doctors, Geisinger accepts medical health insurance from different payers.
The deal marks a major turning level within the healthcare consolidations of the previous twenty years, albeit a perplexing one, notes Paul Ginsburg, PhD, professor of well being coverage observe and administration on the College of Southern California’s Sol Value Faculty of Public Coverage.
“It baffles me as to how Kaiser might see the Geisinger clinic being useful to it given the disparate geographic ingredient,” he mentioned. “I would not suppose that Kaiser is in any respect near with the ability to provide a nationwide insurance coverage plan as a result of there can be too many huge (geographic) holes in it.”
However the announcement that Risant is about to accumulate further well being methods could sign that Kaiser is maneuvering to develop into a nationwide participant. Kaiser has tried in useless to broaden into Texas, New York, and North Carolina prior to now.
“It is too quickly to inform what the consequences could also be on medical doctors and sufferers,” Ginsburg mentioned. He famous that, by controlling each medical providers and insurance policy, Geisinger and Kaiser share important synergies that will ease the way in which for becoming a member of forces.
Tempted by the $5 billion backing for Risant, different medical teams nonetheless struggling to get well post-pandemic probably are weighing the advantages of comparable offers for themselves, he says.
Former Division of Justice healthcare antitrust lawyer Thomas Greaney, JD, a visiting professor at UC (previously Hastings) School of Legislation San Francisco, sees few explanation why regulators would weigh in to oppose the deal. In truth, there is a potential for elevated market competitors for nationwide accounts, he says.
“There are solely 4 main insurers dealing with nationwide accounts proper now, so this might be pro-competitive,” Greaney says. There is a caveat, although: If Kaiser makes use of Risant to push “all-or-nothing” contracting on insurance coverage carriers — requiring them to incorporate all hospitals and clinics within the community in the event that they want to do enterprise with any of them — that would power costs up and appeal to antitrust consideration.
Sachin Jain, MD, MBA, chief government officer of SCAN Group, doubts that it’ll come to that. As a substitute, he believes that by creating Risant, Kaiser is creating a brand new class of healthcare providers group.
“These non-geographically contiguous well being methods with centralized capabilities can drive new dynamics and enhance efficiency,” he mentioned. “It is each an offensive and defensive transfer by Kaiser and Geisinger to attempt to strengthen themselves, however on the similar time there’s numerous promise in what they’ve introduced publicly.”
He is aware of what it is like. SCAN introduced in December that it’s merging with CareOregon to kind the HealthRight Group. “We’re seeing alternatives to make one plus one equal three and I imagine that is precisely what Kaiser and Geisinger are doing, too.”
However Robert Pearl, MD, former CEO of Permanente Medical Group, is anxious by the truth that it is the well being plan arm of Kaiser — not the mixed entity — that is making the Geisinger acquisition. Care supply inside Kaiser Permanente is completed by the medical group, he notes.
“The key sauce of Kaiser Permanente has been the mixed function of each the well being plan and the medical group,” he says. “In the event you do not convey that complete sauce to the desk, it diminishes the chance of the end result being nearly as good because it in any other case is likely to be.”
Jeff Goldsmith, PhD, president of consulting agency Well being Futures, additionally has his doubts.
“Kaiser has no expertise in turning round a big, multi-payer built-in system like Geisinger,” he says. “Geisinger is in deep monetary hassle and Kaiser has had a difficult couple of years, too. They are not going to rebrand Geisinger, so what’s Kaiser doing precisely?”
Particular person medical doctors, too, are watching the take care of fascination after years of seeing personal practices absorbed into more and more massive networks.
“UPMC vs Kaiser is Godzilla vs King Kong,” wrote Phil Grieshaber, MD, on Reddit, referring to the College of Pittsburgh Medical Heart community, Geisinger’s major competitors in its Pennsylvania market. “That is gonna be a massacre.”
Grieshaber, a basic practitioner who at the moment is on medical depart, informed Medscape he expects the rivals will spend important cash at first to realize the higher hand. However inside a couple of years, he believes the rivals will contract and start slicing prices and lowering care.
“That is, in fact, simply my opinion,” he says. “However I am not optimistic about this being a optimistic for everybody.”
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