Kaiser Closes Geisinger Acquisition, Launching Risant Health

Risant Health has completed its acquisition of Pennsylvania-based health system Geisinger, marking the official launch of the fledgling hospital operator formed by California nonprofit giant Kaiser Permanente.

The deal closed roughly a year since it was first announced after being approved by state and federal agencies, Risant said on Tuesday.

Geisinger is the first health system to join Risant, but it’s far from the last. Risant expects to acquire four to five additional health systems over the next half decade, with the goal of reaching total revenue of between $30 billion and $35 billion, Kaiser officials have said.

Kaiser bills Risant as an effort to increase access to value-based care across the U.S. It’s also one of a growing number of gambles from nonprofit health systems looking to shore up their operations amid rising costs and shaky patient volumes.

However, Risant has a long road ahead to prove its efficacy in bolstering the performance of its hospital members.

Investment in Geisinger

Risant’s pitch is simple. Nonprofit participants in its network will gain access to capital and technology to invest in their facilities and expand their services at a time when many operators are slammed with high labor and supply costs.

As for Kaiser, Risant represents an opportunity for the nonprofit giant to expand its reach nationwide through targeted acquisitions of nonprofit community health systems. Kaiser, which has designated up to $5 billion to support Risant, currently operates in eight states and Washington, D.C.

Kaiser and Geisinger did not share financial specifics of the deal. However, it’s structured as a member substitution — similar to a stock acquisition among for-profit entities — wherein Risant becomes the sole corporate owner of Geisinger and assumes its balance sheet, according to documents filed with Pennsylvania regulators.

In a majority of these transactions, which are popular in the nonprofit hospital space, no cash changes hands, according to law firm Foley and Lardner.

However, Risant has promised to allocate at least $2 billion to prop up Geisinger’s hospital business as needed through 2028, marking a substantial investment in a health system that’s seen its financial health oscillate over the last few years.

Geisinger reported net income of $367 million in 2023, after posting a loss of $834 million in 2022.

In addition, Kaiser has earmarked an additional $100 million and $115 million to help expand Geisinger’s health plan and for Geisinger’s research and education businesses respectively, according to a financial document released in May.

Geisinger, which operates more than 130 locations (including 10 hospitals) and a major health plan in Pennsylvania is indicative of the type of organizations Risant is looking for, experts say.

The integrated system is known for its value-based care strategy, combining its plan and provider assets to manage patients’ medical care with the goal of improving outcomes and generating profits.

Risant’s goal of increasing alternative payment models faces an uphill battle, however. Even at hospital systems committed to value-based care — like Geisinger — the lion’s share of revenue normally still stems from fee-for-service reimbursement.

With the acquisition’s close, Geisinger CEO Jaewon Ryu will become the first CEO of Risant Health, while Terry Gilliland, the chief medical officer of a precision health company, will become CEO of Geisinger.

Ryu will report to Risant’s board of directors, which includes Kaiser CEO Greg Adams and three other Kaiser representatives, two Geisinger appointees and one independent director.

Geisinger will continue operating under its own control, leadership and brand.

Nonprofit disruption

Risant’s elevator pitch — giving resource-strapped systems access to more capital and technology than they’d be able to get their hands on alone — mirrors that of other health system disruptors.

Nonprofits are increasingly launching venture funds, spinning out businesses and creating programs to incubate and approve digital health products. In one of the more unexpected moves, venture capital firm General Catalyst plans to purchase a health system — Summa Health in Ohio — so it can test new ways to streamline hospital operations and patient care.

As for Risant, Kaiser said Tuesday that the business’ “initial platform solutions” will help member organizations deliver evidence-based care regardless of patient location.

Risant will also help systems and their patients know how to “understand, access and navigate to the right care at the right time and place,” according to the release.

Deal opposition

Risant’s acquisition of Geisinger closed without regulatory holdup, given a lack of geographic market overlap between the two operators.

It’s difficult for antitrust regulators to challenge such cross-market deals, though the Federal Trade Commission and Department of Justice finalized new guidelines late last year that should give regulators sharper teeth in oversight.

National Nurses United, a union that represents more than 20,000 registered nurses working at Kaiser, objected to Risant acquiring Geisinger, saying in August comment to the Pennsylvania Insurance Department that the transaction would hurt competition in the state.

However, state regulators sided with Risant in allowing the deal to go through, after the organization argued neither it nor Kaiser has ever owned provider facilities in Pennsylvania.

Risant also said in a filing with the PID that it has no plans to let any Geisinger employees go as of the acquisition completion date.

Meanwhile, Geisinger laid off 47 technology workers last summer, though the system said the decision was unrelated to its acquisition by Kaiser.