HomeMy WebLinkAbout2017 01-09 Optum buying surgery center group for $2.3 billion STAR TRIBUNE
Optum buying surgery center group for $2.3 billion -StarTribune.comPage 1 of 2
BUSINESS
Optum buying surgery center group for
$2.3 billion
With the deal, the UnitedHealth Group division greatly expands
outpatient surgery business.
By Christopher Snowbeck(http://www.startribune.com/christopher-snowbeck/277764631/) 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.
Optum would acquire all outstanding common stock of Illinois-based Surgical Care
Affiliates Inc. for $57 per share, according to acquisition terms announced Monday.
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.
"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
(http://stmedia.startribune.com/images/21UnitedHealthGroup.jpg)
DAWN VILLELLA, BLOOMBERG NEWS
in 2012 to 70 in 2015, an increase of about 17 percent, according to the Health Economics
UnitedHealth Group's Optum unit is buying an
Program at the Minnesota Department of Health. The number of procedures at the
Illinois-based company that operates surgery
surgery centers increased by about 19 percent during the period, the health department
centers and surgical hospitals.
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 United-
Health 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.
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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
chris.snowbeck@startribune.comChrisSnowbeck
http://www.startribune.com/optum-buying-surgery-center-group-for-2-3-billion/410094875/1/11/2017