DaVita paid $405M to buy Everett Clinic

The Daily Herald - - FRONT PAGE - By Jim Davis The Her­ald Busi­ness Jour­nal

EVERETT — DaVita Health­care Part­ners paid $405 mil­lion to pur­chase The Everett Clinic, ac­cord­ing to re­cent fil­ings with the Se­cu­rity and Ex­change Com­mis­sion.

The Den­ver-based com­pany took con­trol of the in­de­pen­dent med­i­cal group on March 1. The Everett Clinic kept its name and con­tin­ues to be run by a physi­cian board. It op­er­ates as a sub­sidiary to DaVita.

The Everett Clinic’s as­sets were val­ued about $480 mil­lion, but DaVita also as­sumed $75 mil­lion in li­a­bil­i­ties with the ac­qui­si­tion, ac­cord­ing to a DaVita’s quar­terly re­port filed last month.

The most valu­able as­set that DaVita gained was good­will, an ac­count­ing term for brand name, cus­tomer base and em­ployee re­la­tions. That was val­ued at $249 mil­lion.

DaVita also ob­tained $107 mil­lion in prop­erty and an­other $124 mil­lion in other as­sets. An in­de­pen­dent third party as­sessed the value of the land and equip­ment.

The Everett Clinic was founded in 1924 by four physi­cians and has more than 315,000 pa­tients in Sno­homish and Is­land coun­ties. With 2,000 em­ploy­ees, The Everett Clinic is the fourth-largest pri­vate em­ployer in Sno­homish County.

About 250 doc­tors who owned The Everett Clinic voted in De­cem­ber to sell to DaVita, a For­tune 500 com­pany that op­er­ates 2,000 out­pa­tient kid­ney dial­y­sis cen­ters na­tion­ally, in­clud­ing one in Everett.

The cost of The Everett Clinic was higher than DaVita ini­tially ex­pected. In DaVita’s an­nual re­port filed in Fe­bru­ary, the com­pany said the pur­chase price

would be about $385 mil­lion in cash although it would be sub­ject to ad­just­ments “for cer­tain items such as work­ing cap­i­tal.”

The Everett Clinic ex­ec­u­tives said the or­ga­ni­za­tion wasn’t un­der fi­nan­cial pres­sure to make a deal. In­stead, the group wanted to merge with a larger or­ga­ni­za­tion to be able to fund ex­pan­sion. The clinic wants to dou­ble in size by 2020.

“We’re start­ing to pivot away from the trans­ac­tion and fo­cus on our growth plans,” said Chris Knapp, The Everett Clinic’s chief le­gal of­fi­cer.

And those ex­pan­sion plans are un­der way.

The Everett Clinic plans to open a $17 mil­lion, 40,000-square-foot clinic in Shore­line in King County at 1201 N. 175th St., next to the Trader Joe’s. That’s sched­uled to open Sept. 26.

And the clinic re­cently signed a lease on a 31,000-square-foot fa­cil­ity that will be­come an am­bu­la­tory surgery cen­ter at 21401 72nd Ave. W in Ed­monds, Knapp said. The clinic hopes that will open at the end of the year.

Al­to­gether, The Everett Clinic may add as many as five more clin­ics and al­ready is look­ing at ar­eas as far south as Fre­mont and Bal­lard in Seat­tle to Kirk­land and north Belle­vue on the East­side.

The deal with DaVita gives The Everett Clinic ac­cess to cap­i­tal to take on the ex­pan­sion. DaVita has 65,000 em­ploy­ees and op­er­ates physi­cian groups in six states. It an­nounced an ad­justed net in­come of $828 mil­lion last year.

DaVita pur­chased The Everett Clinic with the idea that it wanted to learn about how the clinic runs its med­i­cal prac­tice, Knapp said. It’s been a twoway street in the first few months.

“We’re learn­ing a lot from the other markets as well,” Knapp said. “It’s been very re­ward­ing to be able to spend time with our peers in Cal­i­for­nia, Colorado and New Mex­ico. We can al­ways im­prove and this gives us more in­for­ma­tion and best prac­tices in other states.”

There’s been a frenzy of merg­ers, ac­qui­si­tions and con­sol­i­da­tions in health care na­tion­ally and lo­cally. Sno­homish County’s three in­de­pen­dent hos­pi­tals — in Ed­monds, Mon­roe and Ar­ling­ton — joined with larger health-care or­ga­ni­za­tions over the past few years. For­mer com­pet­ing health care giants, Swedish Health Ser­vices and Prov­i­dence Health & Ser­vices, also joined forces.

And Group Health Co­op­er­a­tive is be­ing ac­quired by health in­sur­ance giant Kaiser Per­ma­nente, in a deal an­nounced af­ter The Everett Clinic-DaVita merger.

Stud­ies show that health care costs rise in ar­eas where a sin­gle hospi­tal has a mo­nop­oly. The Everett Clinic ex­ec­u­tives have noted that the county still has sev­eral large, com­pet­ing health care in­sti­tu­tions.

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