Kaiser Foundation Hospitals and Geisinger Health are launching a nonprofit entity to acquire health systems and create a national network for value-based care.
The entity, named Risant Health and headquartered in Washington, D.C., will become an affiliate of Oakland, California-based Kaiser but will operate as a separate organization from Kaiser's core integrated operations.
Risant plans to acquire Danville, Pennsylvania-based Geisinger as its first system, contingent upon receiving state and federal regulatory approval. There is no acquisition cost, a Kaiser spokesperson said.
Kaiser, a $95 billion system operating 39 hospitals and more than 700 medical offices in eight states and Washington, D.C., has pledged to invest up to $5 billion in Risant over five years for technology, tools and services.
The plan is a different approach to dealing with the headwinds that have battered the health industry in recent years and led to consolidation. Kaiser's financial losses totaled $4.5 billion in 2022, and Geisinger reported an $842.1 million net loss for the same year.
Hospital mergers and acquisitions slowed during the pandemic but are expected to rebound somewhat in 2023 in a challenging economic environment. Hospital systems also face a host of new competitors, ranging from Amazon to Walgreens and Dollar General, that are moving into healthcare services and grabbing market share from more traditional providers.
Kevin Holloran, senior director at Fitch Ratings, said he sees Risant as a "repository of knowledge," with potential for its member health systems to work toward a common goal of lower costs and better access to care.
Holloran said he expects to see more cross-market collaborations. Advocate Aurora Health and Atrium Health closed a merger in December, creating a footprint spanning the Southeast and Midwest. Presbyterian Healthcare Services in Albuquerque, New Mexico, and Des Moines, Iowa-based UnityPoint Health also signed a definitive agreement to merge earlier this month.
Kaiser Permanente CEO Greg Adams said Tuesday he views the strategy as an opportunity to stay innovative and relevant in the industry.
"I do see [Risant] as a counterbalance to some of the disrupters," Adams said. "As you look at where healthcare is in this country, [as] you look at the dynamics that are playing out, there are new entrants. We've got technologies changing healthcare. We've got retail. I mean, healthcare is going through certainly the most significant transformation in my career."
Over the next five years, Risant plans to acquire five to six health systems to become a $30 billion to $35 billion organization, Adams said. Executives did not share when they anticipate the Geisinger acquisition to close or if they are in talks with other systems.
Geisinger, which reported roughly $7 billion in 2022 revenue, would keep its name post-transaction and help develop Risant's operating strategy. Geisinger operates 10 hospital campuses and a health plan with more than 500,000 members.
Health systems that join Risant will continue to operate as community-based providers drawing support from the larger organization. Through Risant, Geisinger will have access to capital and other resources to expand on its existing clinical services, value-based contracting and rural care delivery methods, executives said.
If the Geisinger acquisition is approved by regulators, Dr. Jaewon Ryu, president and CEO at Geisinger, would become Risant's CEO. Geisinger has not named a successor to oversee its operations.
"It's not like your typical acquisition," Ryu said. "It really is about turbo-boosting some of these capabilities that we know are necessary on this journey towards deepening our chops in value-based care. We've always been an organization that's been on that journey and pretty far out ahead in that journey, but we also know that Kaiser has been sort of defining the gold standard of what that represents across the industry."
Ryu would report to Adams and the Risant board of directors, the spokesperson said. The seven-member board will include Adams and three other Kaiser representatives, plus two Geisinger directors and one independent director.
