ACOs motivate DaVita’s multibillion-dollar physician practice acquisition

The national dialysis provider buys HealthCare Partners, the largest operator of medical groups in the U.S.

By — Posted June 7, 2012

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One large player in the movement toward accountable care organizations is buying another.

DaVita, the Denver-based provider of dialysis services, and HealthCare Partners, which runs medical groups and physician networks in California, Florida and Nevada and is based in Torrance, Calif., announced May 21 that they agreed to become one company.

DaVita’s acquisition of HealthCare Partners, which has 700 employed physicians and a network of 8,300 independent doctors, gives it a stronger foothold in accountable care organizations, which are a significant part of the Patient Protection and Affordable Care Act. ACOs are named as a potential risk to revenues in DaVita’s 2011 annual report published May 3.

HealthCare Partners is one of the Pioneer Accountable Care Organizations named in late 2011 by the Centers for Medicare & Medicaid Services. It also participates in the ACO pilot project for people covered by Anthem Blue Cross, a project led by the Engelberg Center for Health Care Reform at the Brookings Institution in Washington.

DaVita participated in integrated care demonstration projects focused on end-stage renal disease patients for CMS and runs the Accountable Kidney Care Collaborative.

“We believe fundamentally that health care has to change,” said LeAnne Zumwalt, group vice president in government affairs at DaVita. “We want to be able to integrate care for dialysis patients and create a medical home.”

The deal is expected to be completed in late 2012 after an antitrust review. The new company will be called DaVita HealthCare Partners. DaVita is paying about $4.4 billion in cash and common stock for HealthCare Partners.

This is not DaVita’s first foray outside of kidney care, but it is the largest. DaVita’s Paladina Health subsidiary earlier this year acquired ModernMed, which has 30 clinics in 12 states providing primary care to patients paying a membership fee. Terms of the deal were not disclosed.

Health care mergers have increased in recent years in response to declining reimbursement and the need for increased leverage in contract negotiations. Irving Levin Associates reported Feb. 28 that 86 hospital merger or acquisition deals were completed in 2011. This was the highest number in the past decade.

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