UnitedHealth to buy DaVita for $4.9 bn

NEW YORK: The largest US health insurer UnitedHealth Group Inc will buy DaVita Inc’s primary and urgent care services for $4.9 billion in its second acquisition this year to expand its fast-growing medical group, it said.

Health insurers are trying to cut medical costs by playing a more direct role in medical services, arguing they can save money by shifting patients to cheaper, more accessible locations for routine or non life-threatening emergency medical services.

On Sunday, No. 3 health insurer Aetna Inc agreed to be bought by CVS Health as part of a drive to expand medical services at CVS pharmacies to include more preventative screenings such as for vision and hearing.

Denver-based DaVita operates medical groups in six states that serve 1.7 million patients through about 300 clinics, adding to UnitedHealth’s 250 MedExpress urgent care centres and its 200 surgical centres that are part of recently acquired Surgical Care Affiliates. It was reported last month that DaVita was exploring a sale of its medical unit. DaVita’s kidney dialysis unit is not included in the deal.

Leerink analyst Ana Gupte said the purchase is likely to add to UnitedHealth earnings per share by 1 per cent to 4 per cent in 2018 and 5 per cent to 7 per cent in 2019, the first full year after the deal closes.

EvercoreISI analyst Michael Newshal said he thought nearterm earnings additions would be close to neutral given the price that UnitedHealth was paying was on the high side.

UnitedHealth did not provide any details on the financial impact of the purchase. Its shares gained less than 1 per cent to $220.48 on Wednesday, lifting its market capitalisation to more than $212 billion.