Risant Health Plans To Invest Over $1B Into Cone Health

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Dive Brief:

• Risant Health plans to invest north of $1 billion in capital into its next investment: Greensboro, North Carolina-based Cone Health, according to financial documents filed Tuesday.
• The Kaiser Permanente-backed nonprofit health system will spend the funds over the course of five years post-acquisition on facility upgrades and health quality initiatives at Cone, according to Kaiser.
• Risant will also allocate up to $400 million to integrate Cone into its network and up to $300 million over the next decade to support “growth opportunities” at Cone, according to the filing.

Dive Insight:

Risant entered into a definitive agreement to acquire 5-hospital health system Cone Health in June for an undisclosed sum. While the deal hasn’t closed yet, Risant said in its initial announcement that Cone would operate independently post-acquisition. 

Should the deal clear the regulatory approval process, it will be the second acquisition for Risant — a nonprofit health system created by nonprofit giant Kaiser Permanente last spring. Risant formally launched this April when it completed its acquisition of its first health system, 12-hospital system Geisinger.

Risant is an independent arm of Kaiser that buys and operates nonprofit health systems. Kaiser bills it as a tool to expand access to value-based care. 

The health system has proven to be a vehicle to extend Kaiser’s market reach, according to analysts at Fitch Ratings. Risant’s initial investments — Geisinger and Cone — both operate in markets that California-dominant Kaiser previously didn’t.

Risant’s investment in Cone is smaller than its investment in Geisinger. Risant pledged to invest at least $100 million in Geisinger through 2028 to support care delivery and an additional $115 million a year for the next decade to fund research and the expansion of Geisinger’s health plan.

The second quarter marked the first time Kaiser integrated Risant’s financial performance into its results, offering a glimpse into whether such investments are paying off financially for the healthcare behemoth. 

It’s difficult to tease out the exact impact Geisinger had on Kaiser’s overall performance, given it isn’t “even a 10th the size of Kaiser,” according to Mark Pascaris, senior director and analytic lead of nonprofit healthcare at Fitch Ratings.

But it’s clear Risant’s first acquisition at the very least didn’t hurt the nonprofit health system, according to the analyst. 

Kaiser’s operating margin rose to 3.1% in the second quarter, up from 2.9% the same time last year. The system also reported a net income of $2.1 billion, which Pascaris described as a “solid end” to the first half of the fiscal year.