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Kaiser to acquire Geisinger to form hospital venture Risant Health

Animated GIF of two hospitals merging, with a dollar sign appearing in between them

Illustration: Sarah Grillo/Axios

West Coast health system Kaiser Permanente will acquire Pennsylvania-based hospital operator Geisinger, forming Risant Health, a new nonprofit venture.

Why it matters: If cleared by regulators, Risant intends to fold in more hospital systems in the coming years — and could be a powerful consolidator of providers.

Details: Geisinger president and CEO Jaewon Ryu will serve as CEO of Risant Health.

  • The Kaiser-Geisinger deal is expected to close in early 2024.
  • Risant Health will add five or six more health systems to its network in the next five years and invest $5 billion in the enterprise.

By the numbers: As a combined entity, Kaiser-Geisinger would have $100 billion in revenue, per the Wall Street Journal.

  • Oakland, Calif-based Kaiser's reach spans 39 hospitals in the Pacific Northwest, Colorado and Hawaii, with 12.6 million insurance plan members and almost 24,000 physicians.
  • Geisinger has 10 hospitals throughout Pennsylvania, with approximately 600,000 health plan enrollees and more than 1,700 doctors.

What they're saying: "Kaiser’s acquisition of Geisinger via Risant Health will send shockwaves through the value-based care ecosystem," says PitchBook health care analyst Rebecca Springer.

  • Investor-backed VBC players like Agilon, Privia and Aledade have adopted a risk-assuming playbook for independent practices, to great success. "Risant is effectively offering the same service but for health systems," she says.
  • Risant could mirror HCA's approach of operating regional divisions, which would "effectively bring best practices for managing total cost of care in closed systems, while still recognizing disparate regional dynamics," Greg Chittim, partner at consulting firm Health Advances, tells Axios.

The intrigue: Medical device and digital health startups will also see a benefit, given how Kaiser is a "prolific pilot site for medical innovation," Chittim adds.

  • "Sometimes other systems are skeptical of their success given Kaiser's very unique combination of scale and control," he says.

State of play: Hospital consolidation has continued at a steady clip amid cost pressures exacerbated by COVID-19.

  • In 2022, there were 53 hospital mergers, with a handful of those deals representing cross-market transactions connecting health systems in different geographies, according to a Kaufman Hall analysis.
  • Notable tie-ups of that kind include Advocate-Aurora Health's merger with Atrium Health, and the University of Michigan Health and Sparrow Health.

The intrigue: Last month, lawmakers and academics pushed Congress to make it easier for physician-owned hospitals to expand, with proponents saying the move could reverse high costs and hospital consolidation.

  • There are 250 physician-owned hospitals in the U.S.

Yes, but: The Biden administration appeared to put the kibosh on the effort, with CMS proposing new regulations clarifying their ability to deny expansion requests for physician-owned hospitals.

The big picture: U.S. hospitals are staring down severe financial strain after two years of battling the COVID-19 pandemic.

  • The cost of drugs, supplies and labor has skyrocketed in recent years, per an AHA report, while reimbursement from government payers increases at a glacial pace.

What's next: It's an open question whether the Federal Trade Commission will challenge the deal, especially after regulators opted not to touch the huge Advocate Aurora Health-Atrium Health merger late last year.

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