It's an open-ended question, but here are my thoughts:
1 - Kaiser provides Risant with contract services
2 - Capability-based scale with members. Kaiser and members will find ways to incubate new technology, pilot new initiatives, and streamline best practices across these organizations.
- We've already seen the formation of hospital alliances, so there's precedent for that piece - CivicaRx (addressing generic drug shortages), Truveta (data alliance between health systems), and Evolve (strategic staffing alliance)
3 - Access to capital. I've already touched on this, but Risant is heavily involved in financing Geisinger's growth objectives. This promise could be an enticing selling point for other members.
4 - Potential to work toward a national MA plan?
5 - Another avenue for growth and diversification of Kaiser's footprint. Kaiser has historically failed to expand its presence beyond core markets with notable failures in doing so.
Beyond the above, some of which could be a stretch, it's hard to identify clear synergies - details are murky. It seems as if a lot of M&A strategy lately has been…merge first, get big, and figure out the rest later.
Who are potential Risant acquisition targets?
While it's hard to know who will actually join Risant, here are parameters for what I perceive as characteristics for potential member health systems:
- Carving out Geisinger and assuming Risant achieves $35 billion in revenue, that leaves around $25B - $30B in revenue to hit by 2028. From the WSJ piece, Risant is targeting 4-5 more systems. These numbers imply average system revenue of ~$4 billion to ~$7 billion.
- The health systems need to have some sort of population health strategy or chassis. Here's an interesting list to pull from.
- The health systems will likely have some sort of pressing motivation to join - e.g., be on the verge of credit downgrade, emerging competitive threats in the market, fee for service volumes on the decline, or population decline in local health system markets.
- The health systems might hold overlap with existing Kaiser footprint.
Based on the above criteria, and without knowing the nuances involved with each of these systems within their local markets, here are some health systems that more or less fit the mold:
- Samaritan Health Services
- Presbyterian Health Services (although with UnityPoint, assuming that merger takes place, perhaps less likely)
- IU Health
- Sentara Healthcare
- Ochsner Health
- Piedmont Health
You get the idea - there are a number of acquisition targets here for Risant, and it'll be fun to identify which ones take the bait and why. Some of you will
Along with the monetary and operational impact, I have high hopes for Risant to deliver better patient care through shared health system best practices, medical cost management, and better access to care throughout local Risant member geographies.
Given that health system mega M&A is evolving into capability-based scale and Risant's initiative sounds rather fuzzy, things could get pretty creative. While the details are scant and still emerging, Risant is one to watch as a progressive health system platform. Any proposal or project that takes value-based care seriously inside health systems is something worth rooting for.
Still, the ever-present theme in healthcare is that bigger is better, and bigger are getting…bigger…er.
What are the effects of consolidation, and continued vertical integration on patients?
I asked a friend and subscriber Beau Bruneau, who has posted thoughts on vertical consolidation before, to weigh in on the potential negative effects of vertical integration. He's less optimistic about the long-term ramifications, and we need to think about negative consequences:
Vertical integration is hot… for now. But I'm nervous about the sustainability of this model. The obvious criticism is lack of choice and competition. Patients are boxed into a health insurance, often chosen by their employer, and therefore also boxed into the physicians that are in that insurance's network, which can only be exacerbated via continued vertical integration.
Millennials & GenZers (like me) switch jobs at a much higher frequency than older generations. At the extreme, a new job comes new healthcare and having to find new physicians, disrupting the continuity of care and hindering personalized care.
Anyone try to book a new patient visit recently? I've been trying for weeks and haven't found anything near me, in my network, for 2 months. Good luck to anyone around me without my medication until then.
Additionally, I'm afraid this model threatens the negotiating power of physicians, their decision making autonomy, and adds undue administrative burden.
All in all - I think the claims of vertical integration is another example of 'health-washing' - a mirage of buzzwords created to monopolize healthcare while keeping us consumers unaware of the implications on patients and physicians.
Blake's Take on Risant & the Changing Healthcare Landscape
In summary, Risant is a health system platform rollup play taking shape. Geisinger is the initial 'platform' acquisition to jumpstart the enterprise.
The formation of Risant is a health system reaction to ongoing operational challenges within hospitals, emergence of competitive threats (retail, digital health), and payor vertical integration.
Risant's announcement felt rushed. The company holds just a single page on Kaiser's website with a few hundred words. Where's the logo? Where's the standalone site? Shouldn't an enterprise with billions of dollars in backing targeting $35 billion in revenue have had some marketing materials put together? I'm sure more details will emerge once it gains some traction and Geisinger joins in 2024, but for now, there are scant details on what this thing actually means. While the initiative sounds amazing on paper, there's lots of fluff here so far.
Risant holds enormous potential energy, and perhaps the initial merge with Geisinger will likely give it enough of a push to snowball the new healthcare play to help Risant systems achieve operating success.
It's not pronounced like this, but I like to rhyme Risant with "croissant" - it just flows off the tongue better, doesn't it?
Resources and Field Notes:
- Seth Joseph - Risant Health's Value-Based Platform: A Signal Of Future Health System M&A? (Forbes)
- Health System Kaiser Permanente to Combine With Hospital Operator Geisinger (WSJ)
- What Kaiser's Acquisition of Geisinger Means for Value-Based Care (RevCycle)
- 'We never saw Risant Health coming': What leaders are saying about the Kaiser-Geisinger deal (Beckers)
- How borrowing works and credit ratings. (WolfStreet)
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