FTC puts limit on $4.3 billion clinic deal for UnitedHealth Group

UnitedHealth Group closed Wednesday on a big deal to expand its business running medical clinics after regulators said they would clear the proposed acquisition, so long as it doesn't include a large medical group in Nevada

Minnetonka-based UnitedHealth first announced a deal in late 2017 to acquire Colorado-based DaVita Medical Group, an acquisition that promised to significantly expand UnitedHealth's network of clinics, urgent-care centers and surgery centers. The Federal Trade Commission spent more than a year and a half reviewing the proposal, before announcing a proposed settlement Wednesday that lets the deal move forward in five states.

The purchase by UnitedHealth Group of about 225 clinics fits with a broader trend of the nation's largest health insurers morphing into health care conglomerates that directly provide patient care through pharmacies, clinics and other outlets.

"We are excited to take this important step in building a next-generation comprehensive, coordinated health care organization," said Andrew Witty, the chief executive at UnitedHealth Group's Optum division, in a statement.

The Federal Trade Commission (FTC) review determined that the $4.3 billion acquisition would harm competition in the Las Vegas area, where UnitedHealth Group's Optum division already operates one of the region's largest medical groups. The proposed settlement calls on UnitedHealth Group to divest DaVita's medical group in Nevada no later than 40 days after the acquisition is final.

At the end of 2017, DaVita Medical Group managed 280 medical clinics in six states. At that time, the company employed more than 750 primary-care physicians directly and through affiliated physician groups. DaVita also had contracts with a network of about 3,500 associated physician groups and other primary-care physicians.

The medical group in Nevada includes 55 clinics that employ about 340 physicians and advanced-practice providers, according to an Optum spokeswoman. While those clinics aren't part of the acquisition, the deal includes medical groups in California, Colorado, Florida, New Mexico and Washington.

UnitedHealth Group is Minnesota's largest company with about $226 billion in revenue last year. The company operates UnitedHealthcare, which is the nation's largest health insurer, as well as Optum, a fast-growing division for health care services.

David Wichmann, the UnitedHealth Group chief executive, said during an investor conference in May that the company's OptumCare division already employed or operated in affiliation with some 38,000 doctors.

"We view primary care as the epicenter for driving health care quality, more affordability and an improved consumer experience," Wichmann said at the time.

UnitedHealth Group acquired the MedExpress chain of urgent-care centers in spring 2015 for an undisclosed price. This month, MedExpress announced plans for a new center in Florida that pushed its tally of urgent-care offices to more than 260 centers in 20 states.

UnitedHealth announced in early 2017 a $2.3 billion deal to acquire Surgical Care Affiliates, which at the time operated about 200 surgery centers.

Over the past decade, UnitedHealth has been acquiring large medical practices that comprise a business called OptumCare that operates in 10 states. The division's large group in Las Vegas opened earlier this year Optum's first cancer center.

UnitedHealth Group officials have said the business providing direct care to patients could eventually generate $100 billion in annual revenue. But Wichmann said in May that he anticipates acquisitions and growth over another decade or so, with a focus on outpatient care and not hospitals.

"No inpatient, no post-acute — those are two nonstrategic categories for us," Wichmann said.

UnitedHealth Group's Optum division includes not just clinics but also an IT consulting business and a large pharmaceutical benefits manager (PBM).

UnitedHealth Group competes in a sector that has been rattled in recent months by talk of "Medicare for All" proposals that could hurt the company's UnitedHealthcare health insurance business. There's been increased talk over the past year about the prospect of outsiders like technology giant Amazon disrupting the business of legacy health care firms.

Some of those established players in health care increasingly have pinned their hopes on mergers and acquisitions that effectively bring health insurers closer to patients.

Last year, Rhode Island-based CVS Health, which runs the nation's largest PBM and a large network of retail pharmacies, closed on a $69 billion deal to merge with the health insurance company Aetna. CVS has been experimenting with store formats that provide customers more access to a variety of health care services.

Also last year, the insurer Cigna closed on its acquisition of the PBM company Express Scripts. Health insurers Anthem, Centene and Humana all have made smaller moves to get into the clinic business.

Wichmann said at the investor conference last month: "The combination of clinical information, the use of digital capabilities and the capacities to act on those insights through the hands of our 85,000 care deliverers is what distinguishes UnitedHealth Group from other health care companies and also health care technology companies."

On Wednesday, two of five FTC commissioners issued a statement saying they also would have required an enforcement action related to the DaVita business in Colorado due to concerns about competition. While the FTC settlement proposal would let that portion of the deal move forward, the Colorado attorney general Wednesday announced a separate agreement to preserve competition by, among other things, making sure DaVita's medical group in Colorado Springs extends its contract with Kentucky-based Humana.

UnitedHealth Group's insurance division, UnitedHealthcare, is one of the nation's largest Medicare insurers along with Humana. Competition between the two insurers is part of the reason commissioners agreed that competition would be hurt in Las Vegas without the divestiture in Nevada.

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck