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Optum to buy DaVita Medical Group for $4.9 billion

Deal combines multiple payer relationships across physician-led, patient-centered ambulatory care services.

Susan Morse, Managing Editor

Optum announced Wednesday that it is buying DaVita Medical Group for $4.9 billion in cash, gaining a network of close to 300 medical clinics for its OptumCare business.

The deal is the latest foray from UnitedHealth Group's Optum in the expansion of its business services model and another example of health insurance venturing into medical care, using analytics to better control cost.

This week, CVS Health announced it would buy Aetna for $69 billion and provide basic medical care in convenient health hubs in the pharmacies, a move that represents a direct assault on providers' thin margins.

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[Also: CVS Health to acquire Aetna for $69 billion]

DaVita Medical Group, an independent medical group, is a subsidiary of DaVita, a Fortune 500 company. DaVita is the parent company of DaVita Kidney Care and DaVita Medical Group.

Only the medical group is being sold to Optum. DaVita Medical Group manages and operates about 300 medical clinics and affiliated physician networks and also operates 35 urgent-care centers and six outpatient surgery centers in California, Colorado, Florida, Nevada, New Mexico, and Washington.

[Also: Optum Ventures is looking for startups that will make fundamental changes to healthcare system]

The agreement, entered into on December 5, 2017, is expected to close in 2018.

DaVita Medical Group will join OptumCare's physician-led primary, specialty, in-home, urgent- and surgery-care delivery services business. The medical group will have access to Optum's data, analytics, technologies and clinical expertise, to integrate ambulatory care delivery systems and information technology, Optum said.

[Also: Tracking 2017 mergers and acquisitions]

OptumCare works with more than 80 health plans serving millions of consumers through 30,000 affiliated physicians and hundreds of care facilities.

Optum's care delivery portfolio includes Surgical Care Affiliates, MedExpress and HouseCalls.

"Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways while working with more than 300 healthcare payers across Optum in ways that better meet the needs of their members," said Larry C. Renfro, CEO of Optum.

Joe Mello, COO of DaVita Medical Group, will continue in a leadership role in the combined entity, as will the DaVita Medical Group leadership team. Optum said.

DaVita plans to use the proceeds from the transaction for significant stock repurchases over the one to two years following the closing of the transaction, as well as to repay debt and for general corporate purposes.

"Following this transaction, DaVita will continue to be a leader in population health management, with a focus on our U.S. and international kidney care businesses," DaVita CEO Kent Thiry said.
"We also expect to pursue other investments in health care services outside of kidney care."

Earlier this month, Optum launched Optum Ventures with an initial $250 million investment into digital healthcare startup companies.

It recently closed on a deal to buy the healthcare business of The Advisory Board.

Twitter: @SusanJMorse
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