Beyond CVS/Aetna, What Other Healthcare Mergers Mean For The Future
As we’ve covered before, 2017 was a big year for healthcare mergers and announcements, with the proposed $77 billion merger combining the country’s largest drugstore chain with one of the largest health insurance providers at the top of the list. But while CVS/Aetna may still get the headlines, it was far from the only impactful merger announcement of last year. Today we look at two other mergers that came on the heels of CVS/Aetna, as well as one that didn’t happen.
Advocate Health Care and Aurora Health Care.
The day after the CVS/Aetna announcement, Illinois-based Advocate Health Care and Wisconsin-based Aurora Health Care announced plans to merge, which finalized in April of this year. The combined hospital system has 27 hospitals and about $11 billion in combined revenue and serves clients across each of the two Midwestern states. Why is this deal significant? While not a consolidation of two adjacent providers (a sticking point in past merger negotiations Advocate had gone through), it has created another mega-hospital system that has pledged to increase investment in hot areas like telemedicine and digital programs, which could serve as a benchmark for smaller hospital systems to follow.
UnitedHealth Group and DaVita.
Just two days after the Advocate/Aurora merger announcement, the country’s largest health insurance provider, UnitedHealth Group, purchased Denver-based DaVita, Inc.’s primary and urgent care services for $4.9 billion. The deal adds about 2,200 health practitioners and 15,000 other affiliated providers, adding to UnitedHealth’s existing Optum unit of 30,000 physicians. Why is this deal important? While not earth-shattering in isolation, it signals a continued focus for UnitedHealth’s medical group, supporting a tectonic shift in the relationship between insurance and medical providers that will only continue to become blurred as they compete against the likes of CVS/Aetna.
Ascension Health and Providence St. Joseph Health.
In a deal that never transpired, the Missouri and Washington state-based providers would have resulted in the largest hospital system in the country. Talks were rumored in 2017, only to be halted in the spring of 2018. The CEO of Providence St. Joseph, Rod Hochman, has confirmed the reports, but says the timing wasn’t right. So why would this deal have been important, and why is its failure noteworthy? The creation of the country’s largest hospital system would have altered the landscape, but its failure (at least as of now) may indicate issues with the efficiencies of scale of a truly national healthcare system. While it seems almost inevitable that conglomerate, national hospital systems will someday be the norm, it’s worth considering that with so much technological change underway in healthcare, it’s possible that most may not yet be ready for that level of scale.