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In the wake of blockbuster consolidation deals announced by some of the nation’s largest insurers, Kaiser Permanente has announced a major acquisition of its own. The California-based insurer plans to acquire Group Health Cooperative in a deal that would expand Kaiser's service area to Washington state and northern Idaho.

In today’s healthcare reform environment, it seems everyone wants to be like Kaiser Permanente. More health systems are creating their own health plans as they pursue an integrated delivery model that includes hospitals, physicians and payers under one system, which is the Kaiser Permanente model. Now with the proposed acquisition of Group Health Cooperative, the health system is signaling that it’s ready to give the nation more Kaiser.

Because Group Health Cooperative is already a successful local health plan with its own clinics, the acquisition makes sense for Kaiser. At the same time, KP’s technological expertise would be a boost for GHC. Kaiser is one of the best at utilizing telemedicine to conduct virtual office visits, including the use of kiosks set up at some of its largest California employer clients. This technology often eliminates the need to drive to a physician’s office for care. Instead, patients go inside a small booth and get a diagnosis and a prescription. Kaiser’s newest strategy is its Target retail clinics, where it serves its members—and for the first time—non-members. Kaiser has said it may expand this strategy into Washington.

Kaiser could also enter the hospital market in Washington state. The combined power of Kaiser and Group Health Cooperative could lure a hospital to join the delivery network, even as independent hospitals become scarce in Washington state. Kaiser Permanente’s model of fully integrating providers and payers would likely boost Group Health Cooperative’s competitive positioning in Washington state, where the healthcare industry is considered innovative and competitive.

The acquisition is expected to close in late 2016 and still needs approval from state and federal regulators. Washington state insurance commissioner Mike Kreidler could put a hiccup in Kaiser’s plans, which include a new $1.8 billion foundation formed by Kaiser to help close the deal. KP could be forced to make additional concessions to appease Kreidler.

Kaiser is rumored to also be interested in expansion in Michigan. As health plans such as Anthem and Aetna grow through mega-mergers, watch for Kaiser Permanente to continue to do the same.

Follow Jenny Kerr and Sarah Wilson on Twitter at @JennyKerrDRG and @SarahWilsonDRG.

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