2023 saw several health care deals that changed the landscape

Every year, the health care industry behaves more like a balloon: Squeeze one side, and the other expands. Companies that were once just insurers or just pharmacies are tacking on new business lines. The idea is that when profit inevitably gets squeezed in one, it’ll expand in another.

That trend of vertical integration was on full display in 2023, a year when the country’s biggest pharmacy chain bought a primary care provider, and the biggest private insurer branched further into home health.

Hospitals, meanwhile, continued to push the boundaries of expansion — their leaders following through on their promises to grow market power. Here are some of the biggest and most consequential health care transactions in 2023.

CVS plants its flag in primary care

CVS Health bought Oak Street Health for $10.6 billion. Oak Street runs 169 clinics that treat people over 65 who rely on Medicare and its lucrative privatized cousin, Medicare Advantage. CVS’ Aetna subsidiary covers 11 percent of Medicare Advantage enrollees, and its new Oak Street business could help it grow that share.

Vertical integration is one of the biggest forces shaping health care today, said Michael Chernew, a health policy professor at Harvard Medical School. That said, it’s not entirely clear that it’s harmful.

In general, deals like CVS buying Oak Street that integrate care delivery and financing seem like a good thing because they incentivize keeping patients healthy and out of hospitals, Chernew said.

It’s not all upside. Oak Street is still losing hundreds of millions of dollars every year, and it’s not clear CVS can bring it into the black. But it’s hardly CVS’ first foray into primary care, and it certainly won’t be its last.

UnitedHealth’s pursuit of a home and hospice empire

Home health and hospice companies have become targets for insurers because they are lower-cost sites of care when compared with nursing homes and rehab hospitals. Owning home health and hospice also comes with large Medicare profit margins — 22 percent and 17 percent respectively, according to the latest data from the Medicare Payment Advisory Commission.

This trend was epitomized when UnitedHealth Group won a bidding war for Amedisys in June, agreeing to pay $3.3 billion for the home health and hospice operator.

Acquiring profitable, lower-cost sites of care for people is another way in which health insurers can retain more of the dollars they collect as premiums — especially for older adults on Medicare, who tend to use more care.

UnitedHealth is the largest Medicare Advantage plan in the country. By steering those people toward its own home health or hospice providers, UnitedHealth is able to avoid paying other providers, like nursing homes, and instead pay itself.

Kaiser’s new spinoff

This year’s splashiest deal on the taxexempt side of the hospital and insurance industry occurred in April, when Kaiser Permanente said it was acquiring Geisinger. But this was not your typical health system takeover.

Geisinger is the first health system being folded into Kaiser’s new nonprofit group called Risant Health. Kaiser has ambitions of adding at least four other integrated health systems into Risant, so it’s possible, if not likely, that the next targets will appear in 2024.

Risant’s mission and business model remain vague — consolidating health systems across the country to improve their “value-based care,” a phrase that has been used so widely and defined so many different ways that it has become

meaningless. But with Geisinger as the first acquisition, it’s clear Kaiser 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. In essence, Kaiser is looking to collect miniature versions of itself that may be in financial distress.

Don’t sleep on the local dealmaking

Billion-dollar deals and multi-state mergers catch most of the headlines in any industry. But in health care, it’s the local transactions that matter just as much.That’s especially the case when regional hospitals, physicians, or other providers merge, and therefore boost their market power and can command higher prices from their communities.

There’s been no shortage of local deals this year. Novant Health continued to expand its local hospital empire in North Carolina and is now spreading more into affluent parts of South Carolina. Tampa General Hospital just completed a three-hospital acquisition, giving it a lot more market power in the broader Tampa area. University of Colorado Health, already one of the dominant hospital systems in the state, grabbed additional market share by moving into the Pueblo suburbs.

The goal of many of these regional hospital marriages: gaining negotiating leverage over insurers, which then have to keep those hospitals in their networks and pay them higher prices.