What’s next: Regulatory review
Federal and state regulators must approve the deal. While Mr. Adams didn’t say which other health systems he might talk to about acquisitions, Kaiser said it hoped to invest $5 billion in Risant over the next five years, in addition to spending on Kaiser’s core business. The company expects to add five or six healthcare systems to Risant in that time.
Why it matters: Increasing consolidation
Kaiser, which serves 13 million people in eight states and the District of Columbia, has built a reputation for providing high-quality care at a low cost. The organization operates as a healthcare organization, where a fixed amount is paid to care for someone through a closed network of hospitals and doctors. But it has failed to offer its model widely across the country.
The creation of Risant Health offers Kaiser, which had revenues of $95 billion last year, an opportunity to become an even larger and more influential organization by partnering with other hospital groups and health plans.
The establishment of the company is also a response to the rapid changes in healthcare. Large for-profit corporations such as health insurance companies, pharmacy chains and others are snapping up doctors’ offices and urgent care centers, devouring more of the nation’s healthcare dollars.
In line with Kaiser’s model, under Risant, community health systems would invest in technology and preventive care to keep patients healthy so they would require less expensive specialist care and hospital care, Mr Adams said.
As national systems and new players get bigger, “in some ways they pull away from our communities and from our community health systems,” he said.
The new venture “is a way to really ensure that non-profit, value-based community health is not only alive, but thriving in this country,” Mr Adams added.
Background: a difficult environment
As hospital groups emerge from the pandemic, many are grappling with increased spending on supplies and labor. Both Kaiser and Geisinger reported operating losses in 2022.
“Covid has really shown that the lack of integrated, value-based relationships is putting our health systems and our communities at risk,” said Mr Adams.
While Geisinger has long focused on improving care, Dr. Ryu said the health system would benefit from Kaiser’s ability to invest in the kind of technology and preventive care needed to keep people healthier. “This model made sense to us as a way to accelerate and further strengthen those capabilities and bring better health to our communities,” he said.
Because it specializes in providing care on a flat-rate basis, Kaiser has become one of the largest insurers in the lucrative Medicare Advantage market, where its private plans are marketed as an alternative to traditional Medicare.
But Kaiser has not been immune to criticism for overbilling the federal government, and some say its financial model can make it slow to refer patients for expensive services. Kaiser has defended his billing practices, saying his doctors work with patients to provide the most appropriate care.