The U.S.’s biggest health insurer, UnitedHealth Group Inc., said it will buy Surgical Care Affiliates Inc. for about $2.3 billion, further diversifying by adding an outpatient surgery chain.
The two companies previously worked together as partners. UnitedHealth will pay $57 a share, with with 51 percent to 80 percent of that in stock and the rest in cash, the companies said in a statement. The price is a 17 percent premium to Surgical Care’s closing value Friday.
Surgical Care, based in Deerfield, Illinois, serves about 1 million patients a year at 205 facilities and will be combined with UnitedHealth’s OptumCare unit, which provides urgent and primary care. The enlarged business expands OptumCare’s offering in outpatient surgical procedures. Health insurers have been increasing reimbursement for outpatient care to steer patients away from costly inpatient hospital beds.
Surgical Care and Optum are both active in the Indianapolis-area market, with Surgical Care having affiliations with IU Health and Optum providing work for Community Health Network.
Minnetonka, Minnesota-based UnitedHealth has outperformed all other major U.S. insurers partly thanks to its diversified business model, which also includes pharmacy management and consulting services. The deal will further broaden its operations, and comes as hospitals and health systems are making their own forays into the insurance business, threatening to compete with traditional players.
Surgical Care stock rose 15 percent in early trading Monday, to $56.05 per share. Private-equity firm TPG, which owns 30 percent of Surgical Care, has agreed to tender its stock, the companies said, and the deal is expected to close in the first half of the year.
“Outpatient surgeries offer a steep cost discount for surgical procedures as compared to inpatient settings,” Brian Tanquilut, an analyst at Jefferies, said in a research note. More complex procedures, such as joint replacements, have been moving to outpatient settings.
Revenue for Surgical Care is expected to reach $1.48 billion this year, based on the average of estimates compiled by Bloomberg. The deal will probably have no effect on UnitedHealth’s outlook for adjusted earnings per share this year, and boost them modestly next year, the company said.