Strategic Partnerships Mergers and Acquisitions

Kaiser Permanente is set to acquire Geisinger in a deal with major industry ramifications

The two health systems are forming a new organization that will seek to promote value-based payment.

April 27, 2023 3:37 pm

In a move with implications for healthcare business models, Kaiser Permanente has announced plans to acquire Geisinger and form a new nonprofit organization.

Upon acquisition Geisinger will join Risant Health, an organization that is being launched by Kaiser Permanente’s hospital arm. Geisinger and future acquisitions will operate as distinct entities and retain their current branding and local control, as indicated in a news release.

Risant Health likewise will be separate from Kaiser Permanente while incorporating KP’s “80 years of expertise in value-based care.” That’s a reference to the organization’s history of integrating provider and health plan operations.

The plan is for a handful of additional systems to join Risant Health over the next few years as part of a sweeping effort to “improve the health of millions of people by increasing access to value-based care and coverage and raising the bar for value-based approaches that prioritize patient quality outcomes,” according to the news release.

Oakland, California-based Kaiser Permanente, which includes 39 hospitals, a medical group and a large health plan, essentially is seeking to scale up value-based payment (VBP) strategies coast to coast.

“We know fully replicating KP’s closed integrated care and coverage model is not viable in all communities,” Greg. A. Adams, chair and CEO, Kaiser Permanente, said in the news release. “By helping other health systems achieve our value-based quality outcomes and savings in multi-payer, multi-provider environments, we believe Risant Health can deliver a transformative new solution to America’s systemic healthcare problems.”

The hope is to seize an opportunity to fortify the not-for-profit healthcare model amid profound financial and operational stress and the increasing pressure being brought by vertically integrated disruptors ranging from Optum to CVS Health.

“Risant Health is a health system response to the large-scale payvider trend,” Blake Madden, an industry analyst and author of the Hospitalogy newsletter, wrote on Twitter.

Not a true merger

A deal value for the Geisinger acquisition was not announced; the organization reported $6.9 billion in operating revenue amid a $239 million operating loss for 2022. The Pennsylvania-based health system includes eight acute care hospitals, a large multispecialty medical group and Geisinger Health Plan, which has more than 600,000 members.

A news outlet in Danville, Pennsylvania, site of Geisinger’s headquarters, reported that a company letter to employees “indicates that they will remain Geisinger employees and day-to-day operations will remain the same.”

Jaewon Ryu, MD, PhD, president and CEO of Geisinger, will move over to become CEO of Risant Health at the consummation of the transaction, which can become final only after passing federal and state regulatory inspection. The targeted close is early 2024.

“This is not your typical acquisition,” Ryu said during an April 26 media call. “It is structured in a way that preserves local ownership.”

“Partly why we are starting this new entity is to be able to continue all the great things we have,” he added.

He confirmed preliminary plans for five to seven “like-minded” health systems to become part of Risant Health over an approximately five-year timetable. Kaiser Permanente would invest $5 billion in technology, tools and other resources for the new entity, according to reports. As Adams mentioned in the news release, Risant Health participants would operate on a multi-payer basis.

Ryu said data collection and analytics are among the areas in which Risant Health can bolster the VBP-focused operations of Geisinger and other systems that join. The news release cited care model design, pharmacy, consumer digital engagement, health plan product development, and purchasing as areas in which KP’s best practices can help.

Altering the playing field

HFMA’s Shawn Stack, director of perspectives and analysis, called the deal “an exciting development for value-based care and community health.” He noted Risant Health’s focus on “expanding access to equitable and high-quality outcomes through an elevated value-based care platform.”

The transaction has the potential to improve the cost effectiveness of health, a cause HFMA is championing, Stack noted.

In initial reactions, some analysts reflected on what the deal signals for the U.S. healthcare market.

“It seems like the economy is pushing U.S. healthcare more and more toward fewer and broader care organizations,” Nadav Shimoni, MD, managing director with Arkin Digital Health, wrote on LinkedIn.

Over the next decade or so, many community health systems will face pivotal decisions about their futures.

“The national health system landscape will largely result in a verticalized payvider oligopoly unless the Feds step in and block some of these M&As,” Raihan Faroqui, MD, an advisor to several healthcare startups, wrote on LinkedIn. “We will continue to see mega health systems get bigger, acquire more hospitals and brick-and-mortar assets and continue to scale up. The biggest payers will also keep consolidating assets.”


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