STAT's 3 biggest healthcare deals of 2023

1. CVS acquires Oak Street Health

In February, CVS Health purchased Oak Street Health for $10.6 billion, acquiring a company that runs 169 clinics treating people over 65 who rely on Medicare and Medicare Advantage (MA). Aetna, a subsidiary of CVS, covers 11% of MA enrollees, and according to Herman and Bannow, CVS' acquisition of Oak Street could help increase that share.

According to Michael Chernew, a health policy professor at Harvard Medical School, deals like CVS purchasing Oak Street which integrate care delivery and financing generally seem like a good thing since they incentivize keeping patients healthy and out of the hospital.

"We need organizations that do that well to actually keep those profits," Chernew said. "What's the point of investing if you can't execute that strategy well?"

2. UnitedHealth Group acquires Amedisys

In June, UnitedHealth Group* purchased home health and hospice operator Amedisys for $3.3 billion. According to Herman and Bannow, if the deal closes, it will position UnitedHealth to become one of the largest home health and hospice operators in the United States.

UnitedHealth is also the largest MA plan in the country, Herman and Bannow write, and by directing those patients to its own home health or hospice providers, the company can avoid paying large amounts to other providers.

However, the Department of Justice in August asked for more information from Amedisys, and as of now, there is no timetable for when the deal could be completed.

*Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent.

3. Kaiser Permanente announces a new spin-off and acquires Geisinger

In April, Kaiser Permanente announced it was acquiring Geisinger Health and that Geisinger would operate independently under a new subsidiary of Kaiser called Risant Health.

Kaiser said intends to add at least four other integrated health systems into Risant. In an interview, Geisinger president and CEO Jaewon Ryu and Kaiser chair and CEO Greg Adams said Risant intends to specifically target hospital systems already working to move into value-based care.

According to Herman and Bannow, Kaiser's deal makes it clear the health system "wants to absorb a certain type of system: one that owns a large network of hospitals and physicians and also runs its own insurance company."

The local deals that were big news

While the major, billion-dollar deals make the biggest headlines, there were plenty of local transactions in the healthcare industry that were just as important, Herman and Bannow write.

"Smaller mergers just don't get the attention they deserve because they affect fewer people," said Vivian Ho, a health economist at Rice University.

For example, Novant Health expanded in North Carolina and is moving into parts of South Carolina. Meanwhile, Tampa General Hospital completed a three-hospital acquisition and University of Colorado Health expanded into the Pueblo suburbs.

In addition, John Muir Health in California is attempting to buy out the remining stake of a local hospital, however the Federal Trade Commission has sued to block the deal, arguing it would "eliminate head-to-head competition" and "would allow John Muir to demand higher rates" at all of its hospitals.

The big deals that didn't happen

There were also some major healthcare deals that were announced in 2023 but ultimately fell through, Herman and Bannow write.

Specifically, there were two large hospital mergers — one between Sanford Health and Fairview Health Services and another between UnityPoint Health and Presbyterian Health Services — that would have brought together large health systems that were financially struggling, Herman and Bannow write.

"The combination of two weak hospitals does not make a stronger hospital, it makes a bigger weak hospital," said Michael Abrams, a managing partner at Numerof & Associates.

The Sanford and Fairview merger saw pushback from the University of Minnesota, as well as opposition from Minnesota lawmakers and the state's attorney general, Herman and Bannow write.

Meanwhile, it's less clear what ended the UnityPoint and Presbyterian merger, which would have stretched from New Mexico to Iowa, as Presbyterian's CEO told local media it was not a regulatory hangup that killed the deal.

According to Nathan Ray, a partner at West Monroe, many proposed mergers fail because of regulatory interference, but both of these cases came down to leadership being unable to agree on what the future looks like.

"A lot of times there can be great interest in doing something because it looks good on paper, but when it breaks down to what it looks like for your organization, you can quickly find that you don't have as much momentum and excitement for the deal," Ray said. (Herman/Bannow, STAT+ [subscription required], 12/17)

Vertical integration and consolidation are significantly altering the healthcare landscape. From health plans to retailers to incumbent health systems, consolidation is reshaping conventional norms in the industry. Radio Advisory's Rachel Woods sat down with  Advisory Board  experts Paul Trigonoplos and Eliza Dailey to discuss the reasons for and reactions to the recent explosion in consolidation across the industry and explore how different stakeholders are responding and where the future is heading for diversification and integration. Read a lightly edited excerpt from the interview below and download the episode for the full conversation.