Optum’s $4.9B deal to buy DaVita Medical Group further expands UnitedHealth’s care delivery portfolio

UnitedHealth’s Optum unit will acquire one of the nation’s leading medical groups for $4.9 billion in cash.

The company announced this morning that DaVita Medical Group will join Optum’s physician-led primary, specialty, in-home, urgent- and surgery-care delivery services business as part of a deal expected to close in 2018 pending regulatory approval. The physician practice acquisition will expand Optum’s market reach, as the medical group has locations in California, Colorado, Florida, Nevada, New Mexico and Washington.

DaVita Medical Group operates nearly 300 medical clinics that provide primary and specialist care to approximately 1.7 million patients per year. The group also operates 35 urgent care centers and six outpatient surgery centers.

The deal comes on the heels of this week’s announcement that insurer Aetna will merge with CVS in a partnership that many believe will disrupt how healthcare is delivered in the country. The merger will allow CVS to expand its retail clinic model and create one-stop shopping for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty and medical equipment.

It is also another example of how more insurers are moving away from traditional business models to collaborate with providers in order to improve care, lower costs and engage patients.

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Optum said its data, analytics, technologies and clinical expertise will help DaVita Medical Group physicians deliver even higher quality care more effectively to the patients they serve. The combined forces will also allow the physician practices to focus more on care delivery and less on administrative tasks.

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“I am so proud of the DaVita Medical Group accomplishments, including our excellent clinical outcomes as reflected in our star ratings performance, our strong emphasis on growing physician leaders, our teammate engagement and advancing the care model,” Kent Thiry, chairman and CEO of DaVita Inc., said in a statement. “The combination of DaVita Medical Group and Optum should lead to even higher levels of performance.”

Furthermore, the acquisition will allow the groups to work with more than 300 healthcare payers across Optum to better meet the needs of their members, Larry C. Renfro, CEO of Optum, said.

Once the deal closes, DaVita Medical Group will become part of Optum’s OptumCare division, which currently works with more than 80 health plans, 30,000 affiliated physicians and hundreds of care facilities. Joe Mello, chief operating officer of DaVita Medical Group, will continue in a leadership role in the combined entity, as will the DaVita Medical Group leadership team.

DaVita said in the announcement it will use the proceeds from the transaction for significant stock repurchases over the next two years, to repay debt and for general corporate purposes.

Thiry said that DaVita will continue to focus on its U.S. and international kidney care businesses and plans to pursue other investments in healthcare services outside of kidney care.