Davita expands into integrated care with purchase of HealthCare Partners

DaVita Inc., which has shown its interest in integrated care by pushing for renal-based accountable care organizations and participating in a six-year managed care demonstration project for ESRD patients, made a bold statement this morning in announcing its acquisition of Torrance, Calif.-based HealthCare Partners. The $4.42 billion purchase will be paid for with about $3.66 billion in cash, plus 9.38 million shares of DaVita stock.

HealthCare Partners is a national, health care services provider with operations in the Southern California, Central Florida, and Southern Nevada areas. The company, lead by CEO Robert Margolis, MD, provides capitated, primary care and specialty physician services for over 667,000 patients. It operates 152 medical clinics and provides a network of over 8,300 independent physicians. HealthCare Partners’ 2011 revenue was approximately $2.4 billion.

The health services company has about 1,100 dialysis patients in those service areas.

"Our initial take on this transformational acquisition is positive," wrote Kevin Ellich, an analyst with Piper Jaffray & Co., as quoted in the Los Angles Times about the purchase. "This deal was done to provide more comprehensive care to patients as DaVita evolves into an integrated care provider." The transaction probably will close early in the fourth quarter and the combined entity will be known as DaVita HealthCare Partners Inc., the companies said. Once merged with DaVita, HealthCare Partners will operate as a separate subsidiary of the new company. The merger agreement provides that as additional consideration, DaVita will pay to the owners of HealthCare Partners up to an additional $275 million in cash if certain performance targets are achieved in 2012 and 2013 by the HealthCare Partners subsidiary.

"We share aspirations to not only satisfy shareholders' interest, but transform health care," said DaVita CEO and Chairman Kent Thiry during a press conference this morning. "Our shared strengths are working with doctors, working with payers, and pursuing clinical innovations."

Thiry said he met HealthCare Partners CEO Bob Margolis 15 years ago. "We think this model has legs ... the merger would be largest health care delivery space possible," said Margolis.

DaVita has expanded its thinking on health care delivery, first with its near-complete, six-year demonstration project that has provided integrated medical services for Medicare dialysis patients. DaVita and Fresenius Medical Care, who also participated in the demo, have shown positive outcomes when patients are care for on a more holistic basis versus just providing dialysis care services. DaVita has also recently experienced with placing primary care physicians in or near some of its dialysis clinics to provide preventive care. The dialysis provider might be able to better market that approach by partnering with Health Care Partners, Thiry said.

DaVita operated or provided administration for 1,809 dialysis facilities in the United States, serving about 142,000 patients, it said in April.