Dialysis provider DaVita Inc. couldn't operate its large network of physician clinics profitably, but Minnetonka insurance giant UnitedHealth Group is betting nearly $5 billion that it can.
The two health care companies announced Wednesday that UnitedHealth has agreed to acquire DaVita Medical Group in a $4.9 billion all-cash deal set to close in 2018, pending regulatory approvals. The medical staff of more than 2,000 at DaVita Medical would join a roster of some 30,000 doctors already working for or affiliated with UnitedHealth's health services business, Optum.
"This acquisition fits right into UNH's [UnitedHealth Group's] plan to direct patients from high-cost hospital settings to lower-cost urgent care and outpatient facilities and will leverage its vast physician footprint to accelerate that change," Raymond James analyst Michael J. Baker wrote Tuesday in a note to investors.
Word of the deal comes just days after UnitedHealth competitor Aetna agreed to be acquired by CVS Health in a $69 billion bid to vastly expand in-store health care service offerings.
Reuters reported last month that DaVita was looking to sell its medical division for up to $4 billion, after it had become what the news agency called "a significant drag" on the overall business.
DaVita Medical Group posted a $5 million operating loss on nearly $1.2 billion in net revenue in the third quarter, excluding a $600 million goodwill impairment charge, according to securities filings.
Jeffrey Loo, an industry analyst with the investment research firm CFRA, wrote Wednesday that the acquisition of DaVita's clinics, urgent-care centers and surgery centers should mesh well with Optum's focus on primary care, urgent care and outpatient care businesses.
"This unit posted a Q3 loss for DVA [DaVita]. We think UNH's leverage and overlap in certain areas, including cost synergies, should improve the unit's profitability," Loo wrote.
