By expanding its medical care presence, UnitedHealth exemplifies a new diversification in health care
UnitedHealth Group Inc.’s nearly $5 billion acquisition of physician group operator DaVita Medical Group, announced Wednesday, pales in comparison with CVS Health Corp.’s roughly $69 billion acquisition of health insurer Aetna Inc. earlier this week.
But while CVS Health CVS, +0.15% is aiming to emulate UnitedHealth UNH, +0.09% by folding in health insurance with its pharmacy-benefit manager business, UnitedHealth’s acquisition shows it is one step ahead, according to Mizuho analyst Sheryl Skolnick.
“So while others may look to build what UNH/Optum had, Optum moves the bar yet again, establishing itself as the leading physician platform for the transformed health care sector of the future,” Skolnick said.
The recent deals also demonstrate health care companies’ push to diversify. As health care costs continue to grow year after year, companies hope that more insight into and control over the patient experience will help cut costs.
UnitedHealth was the pioneer in this: It has long had Optum as its in-house pharmacy-benefit manager unit, which has become increasingly profitable for the health insurer.
Pharmacy-benefit managers, or PBMs, are middlemen in the U.S. pharmaceutical system that negotiate drug prices on behalf of health insurers and employers.
But, more and more, the health care industry has been shifting away from standalone PBMs, with moves including CVS’ Aetna Inc. acquisition AET, +0.44% and Anthem Inc.’s ANTM, -0.26% plans to launch its own PBM, IngenioRx, in 2020, and toward UnitedHealth’s in-house model.
The logical next step is to fold in medical care itself, like doctor’s practices and hospitals, Gary Ahlquist, Health Industries Principal and Advisor at PwC’s Strategy&, the firm’s strategy consulting arm, told MarketWatch on Monday.
Medical care is already a part of Optum, which offers primary, urgent and ambulatory care services, noted CFRA analyst Jeffrey Loo.
DaVita Medical, which is an unit of DaVita Inc. DVA, +14.20% will add 300 clinics, 35 urgent care centers and six outpatient surgical centers to Optum’s network, along with a presence in six states. The transaction is expected to close in 2018.
UnitedHealth shares have risen 10.8% over the last three months, and DaVita shares have risen 20%, compared with a 6.8% rise in the S&P 500 SPX, +0.07% and a 11% rise in the Dow Jones Industrial Average DJIA, -0.03%
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