Big Mergers Dominate Healthcare Headlines

CVS buys Aetna, UnitedHealth buys DeVita, Dignity to Merge with Catholic Health Initiatives

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CEO SUMMARY: Since Dec. 3, four unexpected megamergers became national news. Pharmacy chain CVS Health acquired Aetna. Advocate Health Care and Aurora Health Care will merge. UnitedHealth Group purchased the 2,000 physicians of DaVita Medical Group. Dignity Health and Catholic Health Initiates decided to create a super-hospital system with 139 hospitals in 28 states. Clinical labs and pathology groups serving any of these entities will want to watch developments closely. 

FOUR LARGE AND UNEXPECTED MEGAMERGERS involving healthcare enterprises were announced within days of each other earlier this month. Each transaction represented a significant development that has the potential to reshape how healthcare is delivered in the United States.

Once completed, these mergers could have a significant effect on clinical laboratories and pathology groups. Below is a summary of the acquisitions, followed by analysis of each transaction.

CVS to Acquire Aetna

This deal was announced on Dec. 3. CVS Health, a national pharmacy chain, is acquiring health insurer Aetna for $69 billion. The transaction requires regulatory approval.

Advocate, Aurora to Merge

The next day, Dec. 4, Chicago-based Advocate Health Care and Milwaukee based Aurora Health Care said they would combine operations. This would create the 10th-largest nonprofit system with $11 billion in annual revenues and 27 hospitals.

UnitedHealth to Acquire DaVita Medical Group

On Dec. 6, UnitedHealth Group announced an agreement to acquire DaVita Medical Group from dialysis provider DaVita Inc. The health insurer will pay $4.9 billion.

Dignity Health, CHI to Merge

A day later, on Dec. 7, Catholic Health Initiatives (CHI) and Dignity Health stated that they had a definitive agreement to merge into a new nonprofit system. When completed, the merger would create the nation’s largest nonprofit hospital system, with revenue of $28.4 billion.

Was A Factor?

News that CVS Health had an agreement to acquire Aetna of Hartford, Conn., caught the healthcare industry by surprise. Analysts speculated that what motivated CVS to move in this direction were reports in the fall that of Seattle received approval for wholesale pharmacy licenses in at least 12 states. has a track record of entering industries and causing prices to fall.

CVS owns CVS Caremark, a pharmacy benefits management company. Analysts are studying how the acquisition of Aetna can help CVS protect its pharmacy benefit management business from possible inroads by

In Forbes, Bruce Japsen reported that one result of the CVS-Aetna merger would be a strong effort to keep patients out of the hospital. Instead, the two companies would aim to deliver as much care as possible outside of hospitals, while moving away from fee-for-service medicine and toward value-based care.

CVS plans to expand services in its pharmacies and retail clinics, and even deliver care to customers’ homes, Japsen wrote. “This is bad news for the nation’s hospitals, which still see millions of patients in their emergency rooms and provide care for ailments that CVS and Aetna executives say could be avoided or directed to an outpatient location,” he added.

CVS operates 10,000 pharmacy and clinic locations, which Aetna could use to provide care directly to customers, The New York Times reported.

UHC Adds 2,000 Doctors

In the case of UnitedHealth’s acquisition of DaVita Medical Group, the health insurer will be adding a medical staff of more than 2,000 physicians to the approximately 30,000 doctors already working for, or affiliated with, UnitedHealth’s health services business, Optum.

The acquisition of the DaVita Medical Group fits right into UnitedHealth Group’s plan to direct patients from high-cost hospital settings to lower-cost urgent care and outpatient facilities, commented Michael J. Baker, an analyst with Raymond James. The deal will allow UnitedHealth Group “to leverage its vast physician footprint to accelerate that change,” Baker added.

Once the planned merger of Dignity Health of San Francisco and Catholic Health Initiatives of Englewood, Colo., happens, it will create the largest non-profit hospital system by operating revenue, according to The New York Times. This system would have 139 hospitals in 28 states and have combined revenue of $28.4 billion. It would employ more than 159,000 employees and 25,000 physicians.

One interesting aspect to this merger is that, once the two companies are combined, the resulting health system would have operations in 28 states with no overlap in hospital service areas. Executives at the two health systems believe this could help expand patient access. They also think this would also help to gain regulatory approval for the merger.

Nation’s Biggest Systems

The next largest non-profit hospital organization would be Ascension Health, which has $22.6 billion in revenue. The nation’s largest integrated health system is Kaiser Permanente, which had $64.6 billion in revenue last year.

This merger is particularly important to CHI, which has struggled financially. Once it is part of Dignity Health, CHI could refinance debt based on Dignity’s higher credit rating, the Times reported. In an announcement, the companies said outpatient care and virtual care would bring providers closer to patients’ homes while broadening clinical programs for patients with chronic illness.

Rethinking Strategies

These four megamergers are evidence of how the health systems is forcing even the nation’s biggest players to rethink their clinical and business strategies. Clinical lab administrators and pathologists can expect to see more acquisitions and mergers that will combine companies in unexpected ways. Each of these megamergers will have the potential to change certain contractual relationships companies and health plans have with clinical labs.


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