Our Take: Kaiser Permanente to acquire Geisinger through launch of value-based care organization Risant Health
California-based Kaiser Permanente, one of the country’s largest nonprofit health systems with 39 hospitals and 24,000 physicians, is teaming up with Danville, Pa.-based Geisinger to launch a new nonprofit company called Risant Health that will operate community health systems — if the deal is completed.
Kaiser Foundation Hospitals created Risant Health to expand and accelerate the adoption of value-based care in multi-payer, multi-provider, community-based health system environments, according to the announcement. Geisinger will be the first of several health systems to become part of Risant Health if all goes according to plan.
Although specific financial terms were not disclosed, The New York Times reported that Kaiser hopes to invest $5 billion in Risant Health during the next five years and expects to add five or six health systems to the new organization in that period.
Geisinger and other health systems that join Risant Health will keep their names and continue to operate as regional or community-based health systems. They will benefit from the value-based care expertise, technology, support, and services Risant Health will be able to provide based on Kaiser’s experience.
“If we can take much of what is in our value-based care platform and extend that to these leading community health systems, then we extend our mission,” Kaiser Permanente chairman and CEO Greg Adams said in an interview, the Times reported. “We reach more people, we drive greater affordability for health care in this country.”
Risant Health will operate independent of Kaiser Permanente’s core integrated care and coverage model. The new nonprofit’s headquarters will be in Washington, D.C.
Dr. Jaewon Ryu, Geisinger’s president and CEO, will become the CEO of Risant Health if and when the transaction between Risant Health and Geisinger closes. Though the organizations have signed a definitive agreement, the acquisition is subject to state and federal regulatory approval.
“Geisinger will be able to accelerate our vision and continue to invest in new and existing capabilities and facilities, while charting a path for the future of American health care, through Risant Health,” Dr. Ryu said. “Kaiser Permanente and Geisinger share a vision for the future of health care, and as the Risant Health name indicates, we believe by working together we will reach new heights in health care and raise the bar for better health for all communities.”
As Risant Health’s first health system, Geisinger will have the opportunity to help shape the new organization’s strategy and operational model.
The transaction between Geisinger and Risant Health is expected to close early next year, Healthcare Dive reported.
Our Take: If Kaiser Permanente and Geisinger can get this deal past the Federal Trade Commission and other regulators that could throw a spanner in the works, as the Brits would say, then Risant Health stands a chance of having some real impact in the communities its health systems would serve.
We don’t see much reason for regulators to argue against the acquisition other than the consolidation card. There’s no geographic overlap between Kaiser and Geisinger, and if Risant Health is going to bring only other community health systems into the fold, geographic overlap shouldn’t be a problem in the future, either.
But, combining Kaiser Permanente and Geisinger would result in an entity with more than $100 billion in combined annual revenue. As additional health systems come on board and increase that revenue, Risant Health could gain enormous bargaining power.
While that kind of heft could definitely be a boon for value-based care, especially with Kaiser Permanente and Geisinger leading the way, the potential influence Risant Health could have in local markets (and nationally) may make the FTC wary. Yet it’s precisely this kind of power that may be necessary to propel value-based care forward.
Kaiser Permanente and Geisinger both have a strong history of innovation, and both have their own health plans. (As the Times reported, Kaiser is one of the nation’s largest Medicare Advantage insurers.) Both seem genuinely focused on improving care for the patients they serve. And, like so many other health systems, both reported net operating losses last year.
With nonprofit health systems still struggling to gain the ground they lost during the pandemic, Risant Health could be a lifeline for many — especially with retailers, insurers, and other nontraditional entities making substantial inroads into the delivery of care.
“Our nation and the health care industry have long waited for an organization to step up and lead by bringing forward meaningful solutions to improve health care in America,” said John Bravman, chair of Geisinger’s board of directors. “It is clear now that Kaiser Permanente is that leader, and the launch of Risant Health will make better health easier, more accessible, and more affordable for the people and communities we serve in Pennsylvania.”
Having said all of that, wait, what? Kaiser is buying Geisinger, which despite the rhetoric, is what this deal looks like? Kaiser is establishing a toehold for a national footprint, ostensibly to compete with the likes of HCA, CommonSpirit, and Advocate Health, but with a “payvider” model?
In theory, this could be where we are headed as a nation, because as we’ve said here all along, without owning the risk, value-based care models will never be the dominant model in health care delivery systems. Next up to join Risant, should it succeed? We’ll throw our lot in with Avera and Tufts. (Intermountain is too independent to play ball with the likes of Kaiser.)
The problem is, we know these two health systems. We speak to their executives regularly as part of our ongoing IDN research efforts. It isn’t something quantifiable; it’s more of a gut feeling. It just doesn’t seem likely that these two cultures will combine without a struggle.
Kaiser Permanente is a regional behemoth, with locations mainly in California but also in six other states. Geisinger is more of a local health system in mostly rural Pennsylvania. Kaiser competes ferociously in the markets in which it operates. Geisinger owns the smaller markets where it competes. One is corporate; the other, small-town approachable. The only thing these two health systems have in common is the importance of their health plans to their respective revenue streams.
We could be wrong. We’re still scratching our heads over the Advocate-Aurora Health and Atrium combination — IDNs with two other distinctly different cultures and geographies. But it just seems unlikely that Geisinger rank-and-file employees, much less its leadership team, are going to idly take orders from Kaiser. Watch this deal closely in the coming months as it unfolds — or unravels.
What else you need to know
AmerisourceBergen and TPG have agreed to acquire OneOncology in a joint venture transaction valued at $2.1 billion. Based in Nashville, Tenn., OneOncology is the nation’s largest independent community oncology network; its network partners include Tennessee Oncology, New York Cancer & Blood Specialists, and West Cancer Center and Research Institute. AmerisourceBergen, the second-largest drug distributor in the U.S., also offers services such as inventory management, practice analytics, and clinical trial support. The deal will give asset management firm TPG a majority interest in OneOncology, and AmerisourceBergen will have a minority interest representing approximately 35% ownership (at a price of approximately $685 million).
OneOncology’s affiliated practices, physicians, and management team will also have a minority interest, according to the news release. Through the agreement’s “put/call structure,” TPG can require AmerisourceBergen to purchase all of the other assets in the joint venture, or AmerisourceBergen can choose to purchase the other assets, starting three years after the acquisition has been completed. Contingent upon regulatory approvals and other customary closing conditions, the acquisition is expected to close by the end of September.
Tenet Healthcare is looking to invest $250 million annually in outpatient facility mergers and acquisitions, Becker’s Hospital Review reported, citing information provided during the company’s first-quarter earnings webcast. Orthopedics and spine will be areas of particular interest for the health system in terms of growth in ambulatory settings. “Spine is still very much in acute care settings and there is still demand and runway for [ambulatory surgery center] orthopedics,” said Dr. Saum Sutaria, Tenet Healthcare’s CEO. Currently, the health system operates 465 ambulatory facilities through its United Surgical Partners International subsidiary.
The Department of Veterans Affairs is “resetting” its Oracle Cerner electronic health record project, which has encountered multiple stumbling blocks and delays since the VA signed a $10 billion deal with Cerner in 2018. Since then, the estimated cost of modernizing the VA’s EHR system expanded to $16 billion and Oracle acquired Cerner. For now, the VA is halting additional deployments of the new EHR until it can correct recently identified issues at the five sites already using it. “For the past few years, we’ve tried to fix this plane while flying it — and that hasn’t delivered the results that veterans or our staff deserve,” said Dr. Neil Evans, acting program executive director at the VA’s Electronic Health Record Modernization Integration Office. “This reset changes that. We are going to take the time necessary to get this right for veterans and VA clinicians alike.” The VA is working with Oracle Cerner on an amended contract “that will increase Oracle Cerner’s accountability to deliver a high-functioning, high-reliability, world-class EHR system,” the VA noted in a press release.
The FDA granted accelerated approval of Biogen’s Qalsody (tofersen), an antisense therapy for patients with amyotrophic lateral sclerosis (ALS) who have a specific genetic mutation. It’s the first ALS drug to be approved based on biomarker data; in clinical trials, it demonstrated the ability to reduce plasma levels of a protein called neurofilament light chain, which indicates nerve damage and is associated with various neurodegenerative diseases. Qalsody was developed to block production of SOD1, a protein researchers believe contributes to ALS pathogenesis when mutated. Although the drug significantly lowered SOD1 relative to placebo in a Phase III study, it did not statistically significantly slow the decline in function in patients who were already exhibiting ALS-related weakness. Biogen worked with the FDA to secure the conditional approval based on the neurofilament biomarker data; an FDA advisory panel recommended the drug’s conditional approval in March. Whether Qalsody receives full approval depends on the results of an ongoing confirmatory trial in patients who have the SOD1 genetic mutation but no symptoms at enrollment. Biogen licensed tofersen from Ionis Pharmaceuticals.
Bright Health has signaled its intent to exit the insurance business. The company announced Friday that it is considering selling its California Medicare Advantage business, which consists of Brand New Day and Central Health Plan. With the exception of Exchange plans in Texas, which will end coverage on July 31, the California MA plans are Bright Health’s only remaining plan offerings — all others were discontinued at the end of plan year 2022. The company plans to pivot to a focus on delivering value-based, consumer-driven care. Bright Health serves approximately 375,000 customers through its Consumer Care Delivery business.
A Health System Approach To Implementing Technology-Facilitated Care. Health Affairs Forefront, 4.25.23
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