(This story was updated at 8 p.m. ET.)
Kaiser Permanente's northern expansion should come as little surprise after a year of deals creating bigger, more integrated health systems. Many want to be more like Kaiser, and Kaiser CEO Bernard Tyson wants to give people more Kaiser.
The Oakland, Calif.-based system announced it will acquire the Seattle-based Group Health Cooperative, expanding Kaiser's geographic reach and boosting its health plan membership by 6%.
The deal, which is expected to close next year, will be the first under Tyson's leadership that takes the system into a new market, and Tyson says he has identified growth in existing and new markets as a key strategy.
“We believe our model is the best way to provide care and coverage to populations and individuals,” Tyson said in an interview. “We want to demonstrate to everyone in this country that our model is more relevant today than ever before.”
That model—a single organization that combines health plans, hospitals and physicians—is one being pursued by more healthcare organizations that have historically operated in one or two sectors.
“We're seeing a collision of all three of those elements,” said Kit Kamholz, an expert in healthcare transactions and a managing director for healthcare consultants Kaufman Hall. How that shakes out, he said, will “determine who is going to be controlling the healthcare dollar.”
Some of the nation's largest hospital operators have steadily acquired medical groups and expanded into health insurance in recent years, including Catholic Health Initiatives, Englewood, Colo., and Ascension Health, St. Louis.
The consolidation underway is also driven by an expectation that larger scale will be an advantage as households, employers, state legislatures apply pressure on health spending. “The entire healthcare environment is expanding from local geographies to regional geographies,” Kamholz said.
WellStar Health System in Marietta, Ga., for example plans to spend about $660 million to gain a foothold in Atlanta and acquire five Atlanta hospitals from Tenet Healthcare Corp.