Kaiser Permanente’s acquisition of Geisinger: Billions committed in deal

As Kaiser Permanente moves to acquire Geisinger Health in its bid to expand value-based care, the California-based health system is making it clear that it will spend billions on the effort.

Kaiser Permanente outlined the scope of the commitment in quarterly financial documents released last week. Kaiser Permanente announced in April that it is forming a new organization called Risant Health, and Geisinger, based in Pennsylvania, will be the first member. Eventually, Risant Health looks to add other hospital systems in the coming years.

Based on the financial documents released last week, here are some key details on the deal.

First, Kaiser Permanente says the deal is expected to close in 2024, assuming regulators grant their approval.

Kaiser Foundation Hospitals, a division of Kaiser Permanente, is designating up to $5 billion “to support core Risant Health capabilities, technologies, tools, and future investments,” the financial documents stated. Of this amount, Kaiser Foundation Hospitals plans to invest a minimum of $400 million over the five-year period.

• Read more: The Kaiser Permanente-Geisinger deal: Questions and answers

The agreement also calls for Risant Health to provide a minimum of $2 billion as needed through Dec. 31, 2028 to support hospital, ambulatory facility, technology and other capital needs, according to the financial statement.

In addition, Risant will assure funding of a minimum of $100 million through Dec. 31, 2028 “to support the expansion of Geisinger’s health plan and care delivery services into contiguous communities in Pennsylvania,” according to the financial statements.

In addition, Risant will also ensure a minimum of $115 million annually to finance Geisinger’s research and education enterprises for a minimum of 10 years, following the closing of the deal.

• Read more: Expect more hospital mergers and partnerships out of financial necessity

Jaewon Ryu, president and CEO of Geisinger Health, will become the new CEO of Risant Health, once the deal is finalized, the systems said previously.

Kaiser Permanente has previously projected that Risant Health would move to acquire five or six health systems over the next five years, The New York Times reported in April.

In terms of revenue base, Kaiser Permanente is “by far the largest not-for-profit health system in the U.S.,” according to Fitch Ratings. Last week, Fitch affirmed Kaiser’s 'AA-' rating, citing “a very strong financial profile, which is maintained despite a challenging operating environment.”

Kaiser Permanente reported $1.2 billion in net income in the first quarter of 2023, compared to a $961 million loss in the same quarter of 2022.

Analysts say some questions about how the acquisition will unfold, including the operation of Risant Health and Geisinger, will only be answered in time. But some analysts have said they see promising opportunities in the deal.

Sachin Jain, president and CEO of the SCAN Group & Health Plan, says Kaiser Permanente’s acquisition could yield some big dividends.

“I think there's an incredible opportunity here for both Geisinger and Kaiser to demonstrate the art of the possible,” Jain told Chief Healthcare Executive® in an interview earlier this month.

Linda Finkel, chief executive officer of AVIA, told Chief Healthcare Executive that she thinks Geisinger joining forces with Kaiser Permanente will help spur more systems to move from a fee-for-service model to value-based care.

The Kaiser-Geisinger partnership “creates an enabling path for health systems to move down the journey to value-based care,” Finkel said.

Kaiser Permanente operates 39 hospitals, hundreds of medical clinics, and a health plan with 12.6 million members. Kaiser is the largest hospital operator in California and is operating in a total of eight states and Washington, D.C. And with the acquisition of Geisinter, Kaiser is expanding its footprint.

“Through Risant Health, we will make our value-based care expertise, technology and services available to community-based health systems, like Geisinger, to strengthen their ability to provide value-based care models with a focus on high-quality and equitable health outcomes,” Greg A. Adams, chairman and CEO of Kaiser Permanente, said in a statement.

Geisinger operates 10 hospital campuses and a health plan with more than 500,000 members. Geisinger would maintain its name when the deal is complete, the systems said.