Kaiser Permanente to acquire Geisinger Health and form value-based care network

California-based Kaiser Permanente plans to acquire Pennsylvania-based Geisinger Health as part of its efforts to build up Risant Health, a multisystem value-based care organization, the healthcare group announced last week.

The deal would be one of the largest proposed acquisitions in recent years, and represents a growing trend toward cross-regional partnerships and increased consolidation. Together, Kaiser and Geisinger model how healthcare organizations can integrate “health insurance, hospital ownership, and other operations” under one umbrella, The Wall Street Journal reported. The acquisition would allow Kaiser to enter Pennsylvania for the first time.

“Kaiser Permanente and Geisinger share a vision for the future of healthcare, and as the Risant Health name indicates, we believe by working together we will reach new heights in health care and raise the bar for better health for all communities,” Geisinger President and CEO Jaewon Ryu said in a statement.

Ryu will serve as the Risant CEO once the deal closes, according to the announcement. The deal is expected to close in early 2024, pending federal and state approval.

Kaiser aims to invest $5 billion over the next five years to add five to six more businesses under the Risant umbrella. Risant and Kaiser will operate independently, according to the announcement.

“We know fully replicating [Kaiser Permanente’s] closed integrated care and coverage model is not viable in all communities,” Kaiser Chair and CEO Greg Adams said in a statement. “By helping other health systems achieve our value-based quality outcomes and savings in multi-payer, multi-provider environments, we believe Risant Health can deliver a transformative new solution to America’s systemic health care problems.”

There were 15 announced hospital and health systems mergers and acquisitions during Q1 2023, according to an April report from consulting firm Kaufman Hall.

The quarter’s only announced mega merger, an acquisition in which the smaller party has more than $1 billion in annual revenue, was the combination of New Mexico-based Presbyterian Health Services and Iowa-based UnityPoint Health, according to the report. That deal would create an $11 billion health system encompassing 48 hospitals across four states.

In comparison, Kaiser’s acquisition of Geisinger would have a combined revenue of $100+ billion. Kaiser operates 39 hospitals and 737 medical facilities, while Geisinger has 10 hospital campuses under its belt. The organizations also operate their own health insurance—Kaiser Foundation Health Plan grew to 12.6 million members in 2022, while Geisinger’s health plan has more than 500,000 members. (The New York Times reported that “Kaiser will not absorb Geisinger, which will keep its name.”)

These cross-regional partnerships are expected “to continue and even intensify,” according to the Kaufman Hall report.

Across health system acquisitions and mergers, however, “operational and financial headwinds are increasingly cited as a factor,” according to the report. Kaiser and Geisinger both reported operating losses in 2022.

It is unclear whether the Federal Trade Commission will challenge the Kaiser-Geisinger deal; it did not contest the cross-regional Advocate Aurora Health and Atrium Health mega merger which closed last December. A 2021 executive order from President Joe Biden prompted regulators to more rigorously scrutinize hospital mergers.