Kaiser Permanente, a huge California-based health-care organization with 39 hospitals and 24,000 doctors, announced on Wednesday that it plans to purchase Geisinger Health, a smaller East Coast organization, in an endeavor to create a new firm that will manage nonprofit community health systems.
If we can take much of what is in our value-based care platform and extend that to these leading community health systems, then we extend our mission, said Greg A. Adams, Kaiser’s chairman and CEO, in an interview. “We reach more people, and we drive greater health-care affordability in this country.” Both organizations are charitable.
Kaiser will not merge with Geisinger, which will retain its name. Instead, Geisinger, based in Danville, Pa., will be absorbed into Risant Health, a new nonprofit organization that will operate independently. Dr. Jaewon Ryu, CEO of Geisinger, will take over as CEO of Risant after the purchase is completed.
The agreement must be approved by federal and state officials. While Mr. Adams did not specify which other health systems he was in talks with about acquisitions, Kaiser stated that it wanted to invest $5 billion in Risant over the next five years, in addition to spending on Kaiser’s core operations. During that time, the company intends to add five or six health systems to Risant.
Kaiser, which serves 13 million people across eight states and the District of Columbia, has a reputation for providing high-quality care at an affordable price.
The organization functions similarly to a health maintenance organization, in that it is paid a set amount to care for someone via a limited network of hospitals and doctors. However, it has not been successful in spreading its model across the country.
Risant Health gives a potential for Kaiser, which had $95 billion in revenue last year, to grow even larger and more prominent by collaborating with other hospital groups and health plans.
Kaiser has become one of the major insurers in the successful Medicare Advantage market, where its private plans are sold as an alternative to standard Medicare, since it has specialized in providing care under fixed-fee arrangements.
However, Kaiser has faced criticism for overbilling the federal government, and others argue that its business strategy causes it to be slow in referring patients for expensive services. Kaiser has defended its billing procedures, claiming that its doctors collaborate with patients to offer the best possible treatment.