UnitedHealth Group‘s (NYSE: UNH) Optum division is a key growth driver for the managed care giant, and M&A is a primary reason. During an investor day meeting in New York on November 27, UNH CEO David Wichmann mentioned the company’s acquisition of The Polyclinic, a 240-doctor group in and around Seattle, Washington. Of course Mr. Wichmann didn’t disclose a price.
The 101-year-old practice began looking for a partner after developing a strategic plan that proved too costly even for a group of 240 physicians with 14 locations. The deal with Optum will allow it retain control as a physician-led practice and it will continue to operate under its brand name.
The practice will become part of OptumCare, tucked away in the OptumHealth division. In the past five years, OptumCare has increased its number of care providers by 130%, according to analyst Frank Morgan at RBC Capital Markets. The number now stands around 40,000.
The Optum division reported third quarter revenue of $25.4 billion, up 11% year over year. It made up 44% of UNH’s $56.6 billion revenue in the quarter. OptumHealth posted $6.1 billion in revenue in that period, up 15.2% year over year. In fiscal year 2019, management projected revenue growth of 14% to 18% and earnings growth of 17% to 21%, according to RBC’s Morgan.
Since January 2017, the deals have indeed piled up. That was the month that Optum took Surgical Care Affiliates (then NASDAQ: SCAI) private, paying $57.00 per share for SCA’s outstanding common stock. The $3.28 billion price included $974 million in debt. At the time, SCA operated 205 surgical facilities, including ambulatory surgery centers and surgical hospitals, in partnership with 3,000 physicians.
The company added DaVita Medical Group in December of that year, as parent company DaVita Inc. (NYSE: DVA) looked to pare down to more core assets. The $4.9 billion deal included approximately 13,000 affiliated physicians across the country. In his remarks to investors on November 27, Mr. Wichmann noted that the deal hasn’t closed due to questions from the Federal Trade Commission.
The company didn’t have as much trouble with its $128 million acquisition of Reliant Medical Group in April 2018. That practice, based in Worcester, Massachusetts, added 230 physicians to OptumHealth’s roster.
The Polyclinic deal may not slide past regulatory scrutiny as easily, however. The Everett Clinic, which had 500 primary and specialty care providers in 20 locations north of Seattle, became part of DaVita Medical Group in September 2015 (price $385 million). At the time, the group cared for more than 30,000 patients annually.
If the FTC approves the deal, The Polyclinic and OptumCare plan to expand its presence around Seattle.