DaVita Builds Business Beyond Dialysis

DaVita’s acquisition in late May of HealthCare Partners, which has 700 staff physicians and a network of 8300 independent doctors, signaled a major dedication to a new strategy, a move that gives DaVita a major foundation with an accountable care organization (ACO), a critical component solidified by the federal Patient Protection and Affordable Care Act.

The Affordable Care Act states that an ACO is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in a traditional fee-for-service program and who are assigned to the ACO.

ACOs were named as a potential risk to revenues in DaVita’s 2011 annual report, according to American Medical News. Rather than try to compete with organizations vying to partner for Medicare dollars in the new ACO care landscape, DaVita acquired the ACO outright. The purchase price DaVita will pay for HealthCare Partners is about $4.42 billion, according to a joint announcement.

HealthCare Partners is one of the Pioneer Accountable Care Organizations named in late 2011 by the Centers for Medicare & Medicaid Services (CMS).

HealthCare Partners’ 2011 revenue was about $2.4 billion. Total care dollars managed by the company was about $3.3 billion. It had an operating income margin of 15 percent on total care dollars under management, according to the announcement.

DaVita Chairman and CEO Kent Thiry said, “DaVita currently executes on its integrated care mission with thousands of physician partners across the country for specialized kidney care services. HealthCare Partners executes on that same mission across a full and deep array of healthcare services in three geographic markets. This combination will create a unique patient- and physician-focused organization.” The three major markets are the Southern California, Central Florida, and Southern Nevada areas.

American Medical News noted that this is the second time DaVita has acquired an organization outside of its core dialysis care model.

DaVita’s Paladina Health LLC subsidiary on Jan. 12 acquired ModernMed, which has 30 clinics in 12 states and provides primary care to patients paying a membership fee. Terms of that deal were not disclosed.

Zack’s Investment Research wrote that “ModernMed’s extraordinary network of providers coupled with a history of excellent care are expected to blend well with Paladina and DaVita’s long-term strategy of growth through meaningful acquisitions.” Now that the unknowns of the bundling rule and of the health of capital markets have eased somewhat, more acquisitions were probable, Zack’s noted. In September 2011, the company acquired competitor DSI Renal Inc.

In November 2011, DaVita’s subsidiary DV Care GmbH acquired ExtraCorp in Germany to expand its dialysis services.