DaVita is selling underperforming managed-care unit for $4.9 billion

DaVita is selling underperforming managed-care unit for $4.9 billion

Optum, a subsidiary of UnitedHealth Group, has agreed to acquire DaVita Medical Group for $4.9 billion, expanding the health care services company's footprint in the direct care delivery environment. That deal stands in contrast to the UnitedHealth mix, which involves a PBM in addition to health coverage and, now increasingly, physicians. It had become a major drag on the company's financial performance in recent quarters as it struggled with low payments from the government's Medicare Advantage program.

Denver-based DaVita operates medical groups in six states that serve 1.7 million patients through about 300 clinics, adding to UnitedHealth's 250 MedExpress urgent care centers and its 200 surgical centers that are part of recently acquired Surgical Care Affiliates. ( DVA ), for about $4.9 billion in cash.

"Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways", Larry C. Renfro, Optum's chief executive, said in a news release. DaVita later expanded it.

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DaVita's physician network unit recorded sales of $4.11 billion a year ago but had become a major drag on the company's financial performance in recent quarters despite contributing 30 per cent to total revenue. At the same time, DaVita has been under pressure in its main business because of scrutiny on the relationship of it and other kidney-care providers to a charity, American Kidney Fund, that has helped patients pay for health coverage.

DaVita plans to use the proceeds from the transaction for significant stock repurchases over the one to two years following the closing of the transaction, as well as to repay debt and for general corporate purposes.

And, the deal is expected to close in 2018, but is subject to regulatory approvals.

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