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Dive Overview:
Rezanto Health plans to put more than $1 billion in capital into its next investment, Greensboro, North Carolina-based Cone Health, according to a financial filing on Tuesday. The Kaiser Permanente-backed nonprofit health system plans to spend the money on upgrading Cone's facilities and on quality-of-care initiatives over the five years following the acquisition, the filing said. Rezanto also plans to allocate up to $400 million to integrate Cone into its network and up to $300 million to support Cone's “growth opportunities” over the next 10 years, the filing said.
Dive Insights:
In June, Rezanto signed a definitive agreement to acquire five-hospital health system Cone Health for an undisclosed amount. The transaction has not yet closed, but Rezanto said in its initial announcement that Cone would continue to operate independently after the acquisition.
If the deal goes through the regulatory approval process, it will be the second acquisition for Rezante, the nonprofit health system that Kaiser Permanente created last spring. Rezante officially launched in April this year after completing the acquisition of its first, 12-hospital health system, Geisinger.
Lisant is an independent unit of Kaiser that buys and operates nonprofit health systems, which Kaiser sees as a tool to expand access to value-based care.
The health system has proven to be a way for Kaiser to expand its market reach, according to analysts at Fitch Ratings. Geisinger and Cone, Lisant's first investments, both operate in markets Kaiser has not previously served, with California being its main market.
Lisant's investment in Cohn is smaller than its investment in Geisinger. Lisant has pledged to invest at least $100 million in Geisinger by 2028 to help deliver health services, plus an additional $115 million annually for the next 10 years to fund research and expand Geisinger's health plans.
The second quarter was the first time Kaiser included Rezant's financial results in its financial statements, providing a glimpse into whether the investment is paying off financially for the healthcare giant.
Mark Pascalis, senior director and analytics leader for nonprofit health care at Fitch Ratings, said it's hard to pinpoint Geisinger's impact on Kaiser's overall performance because the company is “less than one-tenth the size of Kaiser.”
But analysts say it's clear that at least Lissant's first acquisition didn't hurt the nonprofit health system.
Kaiser's operating margin rose to 3.1% in the second quarter, up from 2.9% in the same period a year ago. The company also reported net income of $2.1 billion, which Pascalis described as a “strong end” to the first half of the fiscal year.
