(Story updated at 1:40 p.m. ET)
DaVita HealthCare Partners, which last month signaled it would expand its medical-group division into Colorado, announced a joint venture with Englewood, Colo.-based Centura Health.
Centura Health operates 15 hospitals and is jointly owned by Englewood-based Catholic Health Initiatives, one of the nation's largest not-for-profit health systems, and Adventist Health System, Altamonte Springs, Fla. The newly formed company will employ data analysts, care coordinators, disease managers and other clinical and information technology specialists to work with Centura Health physicians, said Centura CEO Gary Campbell.
The newly formed company will enter contracts with health plans that include financial incentives to manage healthcare costs and quality, including accountable care and capitation contracts. Campbell said the company set a five-year target to enroll 1.2 million people in risk-based contracts under the joint venture.
The new company will be owned equally by Centura Health and DaVita HealthCare Partners, a publicly traded company that includes DaVita Kidney Care, one of the largest U.S. dialysis operators, and HealthCare Partners, the multistate medical group which DaVita acquired in 2012.
For Centura, the deal stands to rapidly increase its exposure to contracts under which profits and losses hinge on the degree to which providers can actively manage healthcare spending alongside patient care. For DaVita HealthCare Partners, the deal diversifies its underperforming $3.2 billion HealthCare Partners physician group division. It is HealthCare Partners' first joint venture with a major health system and fortifies its entry into Colorado, DaVita HealthCare Partners CEO Kent Thiry said.
In late October, DaVita HealthCare Partners announced a deal to acquire Colorado Springs Health Partners, a multispecialty group with more than 100 doctors. That followed April's news of an agreement between DaVita and Pennsylvania's Independence Blue Cross to target data analytics to doctors for chronic-disease management.
Centura entered the partnership with DaVita HealthCare Partners because the company has significant experience with performance-based contracts. Roughly 90% of HealthCare Partners' operating revenue last year was under capitation contracts.
HealthCare Partners will look to expand its presence in Colorado and will seek to enter deals similar to those with Centura Health or Independence Blue Cross in other major markets, Thiry said. Partnerships with leading physicians are essential to its expansion strategy, he said, “but separate from that, we are agnostic between whether our second partner is a payer, as in the case of Independence Blue Cross, or a health system.”
The moves that DaVita has made so far with HealthCare Partners have been small, said Ron Neysmith, a vice president and senior analyst with Moody's Investors Service. The entry into Colorado increases the scale and diversity of its operations, he said.
Last year, the company acquired a few medical practices, an independent physician organization and a hospice company. HealthCare Partners also received approval in 2013 for a managed-care license from California regulators.
HealthCare Partners' financial results have fallen short of expectations since its acquisition. Through the first half of the year, HealthCare Partners continued to struggle and the division's chief executive, Dr. Craig Samitt, departed this year. DaVita, one of the two largest dialysis providers in the U.S., acquired HealthCare Partners for $4.4 billion in 2012. DaVita was scheduled to report its results for the quarter that ended Sept. 30 after markets close Thursday.
For Centura's majority owner, Catholic Health Initiatives, the deal could help drive growth in a strategically important market. CHI owns 70% of Centura Health. Colorado is one of CHI's largest markets by revenue and a target of strategic growth for the health system, according to filings with bondholders.
Follow Melanie Evans on Twitter: @MHmevans