DVA Acquires HealthCare Partners 05/21/12 - (Ryan Kennedy)

On May 21st, DaVita announced the acquisition of HealthCare Partners for $3.66 billion in cash and $758 million in stock, for a total of $4.42 billion. The acquisition of HealthCare Partners represents the entrance into a new market for DaVita, a dialysis service company. HealthCare Partners is the largest medical group and physician network in the United States, and focuses on lower medical costs and positive patients outcomes. The firm provides medical services to approximately 667,000 patients through a network of 700 physicians. HealthCare Partners operates under a capitated model, in which insurers pay a fixed amount, which encourages low-cost positive outcomes, as opposed to maximizing the volume of services and prescriptions. DaVita CEO, Kent Thiry, commented that the capitated model is "where the puck is headed for American health care." In this sense, the deal can be viewed as a way to ease the transition into a capitated dialysis market. The $4.42 billion deal values HealthCare Partners at 8.4x EBITDA, and will be funded by cash on hand and the issuance of high yield debt.