UnitedHealth Group To Become Largest Operator Of Outpatient Surgery Centers

angryman“Screw You UHC!”

Hospital Administrator Reacts To News

A UnitedHealth Group division is poised to become one of the nation’s largest operators of outpatient surgery centers with a $2.3 billion acquisition announced Monday.

Optum buying surgery center group for $2.3 billion

With the deal, the UnitedHealth Group division greatly expands outpatient surgery business.

By Christopher Snowbeck Star Tribune

JANUARY 9, 2017 — 6:47PM

A UnitedHealth Group division is poised to become one of the nation’s largest operators of outpatient surgery centers with a $2.3 billion acquisition announced Monday.

It’s the latest move by United, which is the nation’s largest health insurer, to provide health care directly to patients through its Eden Prairie-based Optum division, which also offers health care IT and a growing business managing pharmaceutical benefits.

In 2015, Optum became the nation’s largest provider of urgent care services by acquiring West Virginia-based MedExpress, which stock analysts cited while praising the deal on Monday. MedExpress last year announced big plans for expanding into Minnesota, and Surgical Care Affiliates already works with four surgery centers in the state.Optum would acquire all outstanding common stock of Illinois-based Surgical Care Affiliates Inc. for $57 per share, according to acquisition terms announced Monday.

“Similar to MedExpress, we expect [Surgical Care Affiliates’] broad range of services and ability to lower cost was a strong driver in Optum’s interest — the company previously indicated that MedExpress was able to perform the vast majority of services performed in an ER while lowering the average cost from $1,500 per visit to $150,” wrote Christine Arnold, an analyst with Cowen and Co., in a note to investors.

Surgical Care Affiliates (SCA) operates 205 facilities in 33 states including 197 ambulatory surgery centers. The facilities offer an alternative to hospital care for procedures that don’t require an overnight stay.

In Minnesota, the number of free-standing outpatient surgery centers increased from 60 in 2012 to 70 in 2015, an increase of about 17 percent, according to the Health Economics Program at the Minnesota Department of Health. The number of procedures at the surgery centers increased by about 19 percent during the period, the health department said, growing to 377,830 procedures during 2015.

SCA is based in suburban Chicago and serves about 1 million patients per year. Optum has 20,000 affiliated physicians and operates hundreds of care facilities.

“Combining SCA and OptumCare will enable us to continue the transition to high-quality, high-value ambulatory surgical care, partnering with the full range of health systems, medical groups and health plans,” said Larry Renfro, vice chairman of United­Health Group and Optum chief executive, in a statement announcing the deal.

Before Monday’s announcement, Optum and SCA launched a partnership in 2016 that covered at least five markets, said Brian Tanquilut, an analyst with Jefferies. In a note to investors, Tanquilut wrote that SCA “has gained great strides in introducing an orthopedic program that we believe is starting to gain traction in shifting patients from inpatient/hospital settings to lower cost [surgery center] settings.”

Across the country, there were about 5,400 ambulatory surgery centers in 2015, according to an industry trade group. Hospitals and doctors often are involved with ownership of the centers, which first appeared in the 1970s.

In comments during a November investors conference, SCA’s chief financial officer said the company has more than 3,000 physicians who are equity investors in facilities managed by the company. In addition, about 4,000 physicians perform procedures at SCA surgery centers.

In Minnesota, SCA currently does business with Ridges Surgery Center in Burnsville and St. Cloud Surgery Center. In March, the company announced a partnership with St. Paul-based HealthEast on a merger of surgery centers in St. Paul and Maplewood. The Maplewood surgery center is a joint venture of HealthEast, SCA and physician investors, according to a news release at the time.

Monday’s agreement calls for the acquisition of SCA’s outstanding common stock for a fixed price of $57 per share, to be funded between 51 percent and 80 percent with UnitedHealth Group common stock. The final percentage will be determined at UnitedHealth Group’s option, and the remainder will be in cash.

The cash/stock deal offers SCA shareholders a 17 percent premium to the company’s previous share price, said Arnold of Cowen and Co.

The transaction is expected to close during the first half of 2017. It’s expected to be neutral to UnitedHealth Group’s outlook for adjusted net earnings per share in 2017, the company said, and modestly accretive in 2018.

UnitedHealth Group shares were down 46 cents on Monday, closing at $161.95.

Twitter: @chrissnowbeck