SEATTLE — Seattle-based Group Health Cooperative is joining a nationwide frenzy of mergers, acquisitions and consolidations in health care.
The healthcare provider is being bought by health insurance giant Kaiser Permanente, Group Health officials said Friday.
Group Health’s 590,000 members in Washington, including about 54,000 people in Snohomish County, won’t see much change in care from doctors and nurses if the deal goes through, said Dr. Chris Cable, the non-profit’s medical director for its clinics.
The nonprofit group sought out a buyer to keep costs down and support future growth, he said.
However, many health insurance industry watchers and regulators say past consolidations usually raise prices for customers.
Kaiser Permanente has said it plans to put money into Group Health and keep down costs for customers here. The Oakland, California-based nonprofit company has about 10.2 million members in eight states and Washington, D.C., including more than 520,000 in Washington and Oregon.
Group Health’s voting members and insurance regulators must sign off on the deal, a process which could take more than a year. After that, Group Health would become a new, eighth region of Kaiser Permanente.
The cooperative’s members likely will vote on the deal in late winter or early spring, Cable said. To cast a ballot, members must have already registered to vote.
The deal would change Group Health’s ownership structure, Cable said. As a cooperative, its members are the owners. Kaiser Foundation Health Plan and Hospitals is a nonprofit run by a board of directors. Its customers do not have a direct say in its management.
Kaiser Permanente and Group Health are “like-minded” not-for-profit organizations, though, Cable said.
Both are integrated- or managed-care providers, offering customers health insurance and health care services. Group Health operates two clinics in Snohomish County — in Everett and Lynnwood.
The two already have reciprocal care agreements, allowing policyholders to visit the other’s clinics when they are traveling.
Group Health had to cut about $250 million in 2012, but it is financially strong now, its CEO and president Scott Armstrong said.
The cooperative brought in more than $3.6 billion in operating revenue in 2014, according to its financial statement.
Kaiser brought in $56.4 billion that year, according to its website.
Bernard Tyson, Kaiser Foundation Health Plan and Hospitals CEO and chairman, called the proposed acquisition a “natural fit.”
The two groups first talked about merging in the late 1990s.
“This is a growth plan,” he said. “This is about how we continue to make healthcare more efficient, more effective and more affordable.”
“Inside Kaiser Permanente, affordability is defined by what people are paying,” not by the organization’s expenses, he said.
Kaiser Permanente is not buying Group Health to make cuts, Tyson said.
The company plans to invest about $1 billion in Washington over the next decade.
As part of the sale, Kaiser will give $1.8 billion to start Group Health Community Foundation, a nonprofit focused on improving the healthcare in Washington. How exactly it does that is “too early to say,” a Group Health spokesman said.
State Insurance Commissioner Mike Kreidler said his office will closely review the proposal and how it could affect Washington’s health insurance market, including competition and consumer choice.
“My chief concern is protecting consumers in Washington,” he said in a statement Friday morning. “I want to ensure that we maintain the healthy competition and wide selection of plans we currently have in our state.”
Consolidation has been happening in healthcare nationally and locally.
The country’s biggest for-profit health insurance providers announced plans this year to buy each other. Anthem is trying to buy Cigna for nearly $50 billion, and Aetna wants to acquire Humana. They are four of the five biggest insurance companies.
In September, the Everett Clinic announced plans to merge with Denver-based DaVita HealthCare Partners, a Fortune 500 company operating physician groups in six states. The merger must still be approved by Everett Clinic’s 250 physician shareholders.
In 2012, two of Western Washington’s biggest health care providers — Swedish Health Services and Providence Health &Services — started a partnership to share medical costs while remaining separate organizations. Both operate hospitals and clinics in Snohomish County.
The deals often are justified as ways to promote growth, control costs, and improve quality and access to healthcare services.
But better health outcomes and lower costs are not guaranteed, say some industry watchers and healthcare providers.
Having fewer health insurers typically drives up premiums for customers, said Leemore Dafny, a professor at Northwestern University’s Kellogg School of Management. Her research has focused on the healthcare industry.
“In short, premiums actually go up, not down, when insurance markets become more concentrated,” she wrote in the Harvard Business Review.
The head of Group Health Physicians, Dr. Steve Tarnoff, said being bought by Kaiser Permanente will benefit patients.
“I believe that delivering the best quality care at a price that people can actually afford is the way healthcare must be,” he said. “That’s why I’ve been at Group Health for more than 30 years, and it’s why I wholeheartedly support joining Kaiser Permanente.”
His group represents about 1,200 doctors at Group Health.
The union representing about 2,200 registered nurses and other caregivers at Group Health needs to see the details before it can say how it might effect its members.
“We need to see the actual deal,” said Chris Barton, the secretary-treasurer of District 1199 of the Service Employees International Union. She formerly worked as a registered nurse at Group Health.
The cooperative and Kaiser Permanente have told the union that they want to work with labor groups and employees in the transition, she said. “And we want to make sure that can happen.”
SEIU members at Group Health approved a new 4-year contract in November. “Group Health has assured us that the contract will be honored,” she said.
Group Health was founded in Seattle in 1947.
“Since our founding, Group Health has relentlessly pursued, and boldly taken, the steps required to ensure that our members get the care and experience they want and deserve,” said Susan Byington, Chair of Group Health Cooperative’s Board of Trustees in a news release.
The proposed acquisition is another step in that direction, she said.
Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.
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