Kaiser Permanente to Acquire Group Health for $1.8B

Kaiser Permanente announced today it will acquire Seattle-based Group Health Cooperative for $1.8 billion, extending its reach along the entire Pacific Coast and putting 2 leading value-based health plans under 1 roof.

The deal is subject to voting member and regulatory approval. It is projected to become final in May 2016, according to the statement from Kaiser Permanente.

The announcement continues the wave of mega-mergers that are transforming managed care in the wake of the Affordable Care Act (ACA). Already this year, Aetna has made plans to acquire Humana and Anthem announced it will acquire Cigna; however, the American Medical Association (AMA) has asked the US Justice Department to halt these mergers.

Washington State Insurance Commissioner Mike Kreidler told The Seattle Times he would watch the deal “very closely.”

“My chief concern is protecting consumers in Washington. This proposal requires my approval. My job is to ensure that the proposal benefits policyholders at Group Health and all consumers buying health insurance in Washington,” he said. “I want to ensure that we maintain the healthy competition and wide selection of plans we currently have in our state.”

In a statement, Oakland, California-based Kaiser Permanente said it had signed an agreement that would add Group Health’s 590,000 members to its 10.2 million members in 8 states and the District of Columbia. Kaiser Permanente has more than $56 billion in annual revenues, compared with $3.5 billion for Group Health, according to published reports.

Under the terms of the transaction, Group Health Cooperative’s coverage area would become a new Kaiser Permanente region, known as Group Health Permanente, PC. Because of the distinct governance structures of the 2 organizations, Kaiser Permanente said the $1.8 billion payment would be used to create a “not-for-profit community foundation with the goal of improving community health.”

The 2 groups have much in common: both were among the earlier healthcare entities to integrate the provider and the health plan within a single franchise, which puts them in a solid position to take on the value-based payment goals that CMS demands for 2016 and beyond. Information from Kaiser Permanente said the relationship would allow it to meet the needs of large group customers “in the locations where they operate.”

Though smaller, operating in Washington state and Idaho, Group Health has a national reputation for its ability to integrate primary and behavioral health services. Kaiser Permanente is well-known for its independent research arm that produces actionable data, which drive novel solutions in chronic disease management.

Kaiser Permanente said it would “invest in facilities, technology, member experience and the Group Health Cooperative workforce,” and a statement from Group Health Physicians President Steve Tarnoff, MD, promised a continuation of care and coverage at current standards.

“I’m joined with my Board of Trustees in fully supporting this new direction for our organization,” Tarnoff said in his statement. “Joining with Kaiser Permanente is a move that reinforces our commitment and focus on providing the best care for our communities.”